Monday, July 07, 2008

Returns on College

by Andrew Gillen

Clive Crook has a new column out titled America’s human capital is tested in which he offers insight into the fact that
baby-boomers departing from the labour force will have better educational qualifications than the younger workers replacing them. If the ultimate source of an economy’s ability to grow and prosper is its human capital, the US is in trouble.

He offers a number of possible explanations for this:
1) Saturation - a natural ceiling has been reached
2) Education becomes obsolete - a 30 or 40 year old college education is probably out of date
3) On the job training has replaced formal education
4) College "is not in fact a good investment [for students] and that it is an even worse investment for the taxpayers who subsidise it."

Seeing number 4 is very interesting because almost everyone takes the view that college is a great investment with phenomenal returns (see the College Board publication Education Pays).

Unfortunately, the wages of college educated workers have been increasing more slowly than the cost of college, which means that the returns to college (monetary ones at least) have been falling. As students take out more and more loans (over 21,000 on average according to the Project on Student Debt), we may see more and more 18 year olds make the decision that college is simply not worth it. The return on college may still (probably is?) positive on average, but as long as tuition continues its explosive growth, the return on college will fall, and point 4 will be seen as the leading cause in the decline of enrollments.

3 comments:

capeman said...

Andrew, if you want to join our increasingly uneducated younger generation, that's your privilege. You can join the illegals, the high school dropouts, the uneducables heading for prison, those headed for a Hamburger U. There are still plenty of people, many from foreign countries, who want to study here and take your place. Where I work, they don't know where to put all of them come the Fall. But we'll manage and then get down to the serious work of consolidating their advantage over the sad sacks and the losers.

Eveningsun said...

Well, wait just a minute.

We're told "that baby-boomers departing from the labour force will have better educational qualifications than the younger workers replacing them."

But it's not as if everyone goes to college, gets a job, and then never sets foot on campus again. How many older workers got degrees several years after joining the labor force? If it's a significant number, then the old cohort and the young might be much more similar than at first appears.

According to the FT article, "In 2006, Americans aged 55-59 collectively possessed more masters degrees, professional degrees and doctorates than Americans aged 30-34." But hell, I didn't get my doctorate until I was 40. How many 30-34 year olds without an advanced in 2006 degree will get one by the time they're in their 50s?

We're also told that perhaps college "is not in fact a good investment [for students] and that it is an even worse investment for the taxpayers who subsidise it." Might be worth noting here that the more college is subsidized by the government, the better an investment it is for the student, and the worse it is for the taxpayer. Kind of odd to combine these two aspects of the question as has been done here.

Eveningsun said...

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