Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

May 21, 2008
By: Kevin Drum

THE SKILLS GAP....Over the past couple of decades the wage premium for getting a college degree has gone up dramatically. In 1973 a typical college grad earned 30% more than a high school graduate. Today a college grad earns something like 90% more.

Standard economic theory predicts that this should lead to way more people getting college degrees, but that hasn't happened. Altonji, Bharadwaj and Lange report that, when various socioeconomic factors are held constant, "the supply response to the increase in skill premia between cohorts was small: about 1% on average and about 1.5% at the median." In other words, kids aren't bothering to increase their skills very much even though the reward for doing so has skyrocketed.

Why? Brad DeLong proposes that part of the answer may be the surging cost of college, which not only makes the return on a bachelor's degree lower than it would be otherwise, but probably makes it seem even lower than it really is to teenagers with short time horizons. He's also got some other ideas that he muses about here.

But I want to toss out another possibility that's been tickling my brain for a while. On the right is an EPI chart that shows declining wages for college grads over the past seven years. Ezra Klein comments:

As an economist told me a year or two back, "there's never been a worse time to be a college graduate. But there's never been a worse time not to be a college graduate." Your wages may be higher than those of less educated cohorts, but they're stagnant nevertheless.

Right. And maybe that's the problem. When I say that the premium for getting a college degree used to be 30% and now it's 90%, what do I mean? One possibility is something like this:

  • 1973: high school grad makes $42K, college grad makes $55K.

  • 2006: high school grad makes $42K, college grad makes $80K.

This probably would motivate more kids to get college degrees. But that's not what actually happened. Here's what actually happened for male workers (all figures adjusted for inflation):

  • 1973: high school grad makes $42K, college grad makes $55K.

  • 2006: high school grad makes $31K, college grad makes $61K.

The skill premium hasn't gone up because a college degree is way more lucrative than in the past. In fact, it's only slightly more lucrative over the long term and completely stagnant among recent grads. Rather, the skill premium has gone up because the value of a high school degree has cratered.

So here's my thought: even though the two scenarios above are (roughly) economically equivalent, they might not be psychically equivalent. If the value of a college degree had gone way up, that really might prompt more kids on the margin to study harder and go to college. Not only would that higher value be fairly obvious since it would get a lot of attention, but the prospect of doing better is highly motivating. But does the declining value of a high school degee motivate them in the same way? I doubt it, even though mathematically the effect is the same. For starters, many teenagers may not really understand the hard reality of the trend in non-college wages, and in any case a slow but steady decline simply doesn't motivate people the same way as dangling a reward in front of them does. Instead of making them try harder, it tends to make them feel helpless and angry.

Am I explaining myself adequately here? I'm not sure. But it seems to me that there are lots of cases where real-life behavioral responses depend not merely on monetary differences, but on the direction and reason for those differences. Perhaps if you want more kids to go to college, you need to reward them for going to college, not merely punish them for not going.

Kevin Drum 1:50 PM Permalink | Trackbacks | Comments (82)

Bookmark and Share
 
Comments

A thought as a recent grad school grad...

The amount of debt associated with college has risen dramatically in recent years. That means that young college graduates, most of whom do not start out making $60K, spend most of their 20s at a financial disadvantage to their peers who graduated high school and went into, say, construction.

Enough people notice that their college-educated peers are noticeably poorer than them and the idea starts to form that college may not be a great choice. Continue that for a generation or so and you have people making the, possibly short-term, rational choice not to send their children to college.

Posted by: Wm on May 21, 2008 at 2:01 PM | PERMALINK

Not all college degrees are created equal. I will bet there is a significant difference between the job prospects for people who graduate from a city college and those who graduate from Harvard, Yale or Stanford. Far more people graduate from the local college or state university than from Harvard, Yale or Stanford. I bet their wages are not that much better than high school graduates. Kevin, do you have any numbers?

Posted by: Ron Byers on May 21, 2008 at 2:05 PM | PERMALINK

Well, my psychology at 18 years old consisted of ingesting as many psychoactive substances as I could get ahold of, while making overtures to any girls I encountered in the process, so I might not be the best commentator. But it seems very strange and counterintuitive that kids would react to, say, the closing of the local Whirlpool factory by saying "I'll just get a job as a janitor at the local hospital" rather than "I'll go to the local state U." So I'm unpersuaded by Kevin Drum's suggestion.

Posted by: y81 on May 21, 2008 at 2:05 PM | PERMALINK

Let's assume that 18-year-olds are logical, which is one of the worst assumptions ever made.
Option A: Make 31K per year
Option B: Lose 30K per year for four years, then make 61K per year after that.

If you choose Option A, you are wealthier until the age of 30. It is difficult for an 18-year-old to think beyond age thirty for two reasons. First, we're talking about 18-year-olds. Second, nobody assumes that they are going to make the average salary, and those numbers are meaningless to project 12 years into the future for a single person.

All that being said, I don't think the decision-making process has changed significantly for an 18-year-old today as compared to 35 years ago. If you hate school, you won't go to college. If you feel like you need money now, you won't go to college. I think those factors are more important for many people than calculations of average lifetime earnings.

Posted by: reino on May 21, 2008 at 2:08 PM | PERMALINK

Kevin's numbers show that 2006 college graduates have a salary that is 1.96 times that of a HS graduate. In 1973 it was 1.3 times more. So in reality it is more rewarding today to get a degree than it was in 2006.

Kevin asserts that this is more lucrative because wages for HS graduates have tanked. Well to be frank, I can see why. Kids graduating from HS today know LESS than they did in 1973 - at least with respect to the skills they need in order to conduct business.

Posted by: optical weenie on May 21, 2008 at 2:10 PM | PERMALINK

Ezra Klein says:

"The massive gains in wealth in this country are apportioning to a small slice of rich people at the very top of the income distribution, not the broad mass of skilled, college-educated workers who hoped they were buying into the economic ruling class but, in fact, are just the new middle."

Precisely the result of globalization. In order to have globalization, the globe needs global wealth, and in the absence of global institutions, the wealthy play the role of allocating capital.

While we globalize, college pays off less for the highly industrialized, but pays off more in developing countries.

But we cannot have global institutions because the progressives in this country cannot have their entitlements exposed to global economic trends. This desire to protect national accounts at all costs is executed by people like Obama, and makes people like Soros rich.

Posted by: Matt on May 21, 2008 at 2:11 PM | PERMALINK

What troubles me about this analysis is the lack of recognition that a fairly large number of kids really shouldn't be going to college. They won't have the aptitude/skills etc. to get much out of it, and once they graduate (assuming they do) they're likely headed for low-level jobs anyway. Our economy needs to have a place for these people that isn't just about starvation wages.

Put another way, you're not going to college-educate your way to a less unequal society.

Posted by: jimBOB on May 21, 2008 at 2:12 PM | PERMALINK

Ron Byers is accurate. Not all degrees are created equal. The schools that cost more than most people make in a decade are not intended for the poor really smart kid. Yes, there are grants etc but getting one of those like trying to win the lottery. One of my neighbors' kids is going to a tech school. His parents both have masters degrees. He's smart but doesn't want the debt, wants to make his own money.

Posted by: josh on May 21, 2008 at 2:13 PM | PERMALINK

For more illumination on how people make decisions that are not consistent with economic theory see "Predictably Irrational" by Dan Ariely. He would surely agree that perceptions are much more influential than a classic economic analysis of self-interest, especially when one would have to calculate a long term payoff against short term pain (cost of tuition, foregone income, and last but not least having to actually attend college!).

Posted by: Catherine on May 21, 2008 at 2:13 PM | PERMALINK

Kevin's logic, I think, runs contrary to much behavioral psych research by people like Kahneman and Tversky. Basically, people are very risk averse when it comes to potential *losses* (i.e., the wages that come with a HS degree), but are less motivated by potential gains (i.e., the college degree average wage bump). This may not be exactly applicable but it seems to me that people *should* be motivated now to get a college degree if they know that they'll likely suffer huge wage declines by having only a HS degree.

Posted by: Jeff on May 21, 2008 at 2:14 PM | PERMALINK

If you hate school, you won't go to college.
Right.. it's also possible for an 18 year old to work a couple of years, then realize that he isn't making the kind of money he wants, and goes back to school. But it's also true if you don't have the grades to get into college, your options are more limited (going to the city college route), so really, it's given your grades, what are your options? Heck, I knew a college grad who wasn't making the money he wants, and went back for a higher degree.

Posted by: Andy on May 21, 2008 at 2:20 PM | PERMALINK
Standard economic theory predicts that this should lead to way more people getting college degrees, but that hasn't happened.

Not without a whole lot of assumptions, many of which are self-evidently false, it doesn't.

Posted by: cmdicely on May 21, 2008 at 2:21 PM | PERMALINK

Given that the people making millions per year are probably uniformly college grads, I think that skews the average a bit. I think students on the borderline understand that going to college isn't by itself going to get them a job as a hedge fund trader.

Posted by: a on May 21, 2008 at 2:23 PM | PERMALINK

Young people are probably ahead of the learning curve. They may expect the value of a college degree to crater just like it has for high school degrees, which is probably happening now in the economy. When calculating the huge opportunity costs of college degrees and the as yet unrealized cratering of college degrees' earning power in the near future, they may be making a rational economic choice.

Posted by: Brojo on May 21, 2008 at 2:34 PM | PERMALINK

What professions are all these young (male) grads going into where they can make that kind of money with a bachelors degree?

Sure, the statistics show that even some college education will help people attain a higher standard of living than those who only finish high school. But there are lots of socio as well as economic factors that help that reality along. Correlation does not necessarily equal causation.

Posted by: san antone rose on May 21, 2008 at 2:34 PM | PERMALINK

Just one point, here, that always seems to be forgotten: the main reason there is a premium for a college education is that there are relatively few people with one. Should the population as a whole become more academically endowed, the earnings of college graduates will decline faster than anyone would believe, since supply would outstrip demand.

I think many youngsters intuitively know that this is a lose-lose situation for them.

Posted by: Carol on May 21, 2008 at 2:39 PM | PERMALINK

My son, a college graduate who is also a "World Class" mechanic (GM's term, not mine), recently decided that he was tired of turning wrenches. He wanted to use his college degree. He had to take a 30K + cut in pay to take a white collar job. What people forget is that most college graduates don't start out at the top. They start lower but have much ceilings.

Posted by: Ron Byers on May 21, 2008 at 2:43 PM | PERMALINK

"Higher" ceilings.

Posted by: Ron Byers on May 21, 2008 at 2:46 PM | PERMALINK

This discussion has ignored the topic of "Why has the value of a High School degree catered"? The collapse of unions in this country has killed the unskilled worker, and driven wages way down, which also affects wages of degreed professionals.

Posted by: Eric on May 21, 2008 at 2:48 PM | PERMALINK

"there's never been a worse time to be a college graduate. But there's never been a worse time not to be a college graduate."

So why would I bother with college?

It's undoubtedly true that HS grads no less than they did 30 years ago, but if all the manufacturing jobs have left the coutnry anyway, what -- from a wage-earning standpoint -- does it matter?

But now all the "eddicated" jobs are leaving, too. So. Seriously. Why would I bother?

Posted by: thersites on May 21, 2008 at 2:57 PM | PERMALINK

To add another reason for Eric, globalization and technology have led to fewer manufacturing jobs, which is bad for people who did not go to college.

A question about the statistics: Do the college statistics include people who went to graduate/professional school? If so, then the role an undergraduate degree plays in earnings is being exaggerated.

Posted by: reino on May 21, 2008 at 3:00 PM | PERMALINK

Given his typing skills it is easy to see why Thersites is limited to working the drive-thru window at Burger Meister.

Posted by: optical weenie on May 21, 2008 at 3:00 PM | PERMALINK

As usual in discussions like this there is an assumption that the only educational option out there for a high school graduate is either a 4 or 2-year college. That is decidedly not the case. Is there any allowance at all in these statistics for vocational technical training? What sort of premium does a vo-tech certification give someone over an HS diploma and how does this compare to college?

People who have been to college are routinely absolutely blind to this entire portion of the universe. Either you go to college or you're an uneducated, unskilled loser living in a trailer.

Posted by: Rob Mac on May 21, 2008 at 3:03 PM | PERMALINK

According to the graph, recent college grads are earning less now than in 2001. Young people considering higher education from institutions unlike Harvard or Stanford, probably have a better understanding of how college education's benefits are falling. They are experiencing the fall in living standards that are now eroding the middle class life style.

Posted by: Brojo on May 21, 2008 at 3:05 PM | PERMALINK

Seems to me you are way over-emphasizing the motivation factor here, and neglecting the simple economics: for the parents of both segments, but especially high school educated parents, it is harder financially to help send a kid to college. The wages of even college educated parents are not rising nearly as fast as the cost of college. The kids, too, can't make as much in their own jobs to help fund it themselves. Not sure what's going on on the borrowing front, but it may be tougher to qualify for the larger amounts needed.

Posted by: urban legend on May 21, 2008 at 3:07 PM | PERMALINK

No, it's because of politically-correct affirmative action social engineering that they gave the fry cook job to some girl!

Posted by: thersites on May 21, 2008 at 3:13 PM | PERMALINK

What no one seems to be talking about are the many non-economic factors at work. Those who get college educations probably value things like education, achievement and status more; they probably place less value on other equally important things.

Also, we need to get rid of the notion that there is something special about the college admissions process and the idea that those accepted are the "cream of the crop". As a group, those accepted to college are identical in every metric to those who earned a high school diploma but didn't go on to college.

And finally, as someone who has made a lot of hiring decisions in my life, I'll say that my preferred people are those with some college but who never go their bachelor's degree. These are the people who have all of the best traits of college graduates: self motivation, ability to deal with complex relationships, good interpersonal skills; yet they also have the restlessness and strong ego that is required of a true leader.

Posted by: Dave Brown on May 21, 2008 at 3:17 PM | PERMALINK

Perhaps some kids just aren't capable of making it through college. Nowhere near the percentage that don't get the degrees of course, but it's there. However a greater reasoning might be that non-college professions (electricians, IT Systems Managers etc.) are chosen instead.

@Dave Brown: As a Grad Student you have no fucking clue how strong my ego is. It's terrifying monster of ID actually.

Posted by: MNPundit on May 21, 2008 at 3:22 PM | PERMALINK

I have two answers:

(1) You are comparing _averages_ when instead you need to compare the _marginal_ student. The average college grad figure includes some very smart, very well-connected people who are making lots of money as cardiologists or bankers or what have you. The kid on the border between college & not-college is not that person. It may very well be the case that not getting a college degree is perfectly rational for that marginal student because it would not affect his earnings much. All college grads do not make more than all non-college grads, just as all men are not taller than all women.

(2) The decision to go to college or not is effectively made early on in a kid's life. Doing poorly in school early on has a cumulative effect that makes catching up very difficult. At 18, the young person may very much want to go to college but be trapped by years of educational underachievement.

Posted by: DCreader on May 21, 2008 at 3:31 PM | PERMALINK

Considering the cost of college these days, and that there is no guarantee of a job when you graduate, I can't blame anybody for not wanting to go to college.

If you want to get more people to go to college, spend money to build new universities.

The universities are just like the oil companies. They have little incentive to expand, since it will just drive prices down.

Posted by: DR on May 21, 2008 at 3:46 PM | PERMALINK

There's a lot to what DCreader is saying. A lot of factors beyond ability go into whether or not someone will get to go to college, and to which college. These same relative social advantages can channel someone into the better-paying careers. Take a really bright kid that goes to Podunk Community College, or a dumbass who gets to go to Yale and Harvard Business School because of family connections. Which one is going further?

There are exceptions, of course, but a lot of life's destiny even here in America is due to the accidents of birth.

That said, I wish I'd finished college. Then that smart-ass science girl wouldn't make fun of me all the time.

Posted by: thersites on May 21, 2008 at 3:48 PM | PERMALINK

DCreader: You are comparing _averages_ when instead you need to compare the _marginal_ student.

Quite right.

Because a larger percentage of the US work force has a college education these days, I wonder how much of the change in earnings between non-college and college educated people is because people that in the past wouldn't have gone to college, go to college these days, but don't actually get better jobs today than they would have in the past (even sans college).

Looked at another way, how many jobs are there today where a college degree is required (or at least generally expected), even though in the past it would have been filled just as well by a non-college grad. Are we seeing nothing more than an education arms race?

Pardon the anecdote, but my aunt never went to college, yet rose to just below the VP level of a major bank. I doubt that could happen today.

Lastly, I suspect that part of the degradation in the quality of a HS education is because the better students are expected to go to college anyway. In other words, why sweat it when they're going for another four years of education anyway. In the past, many bright HS grads went directly to work.

Posted by: alex on May 21, 2008 at 3:54 PM | PERMALINK

thersites: Then that smart-ass science girl wouldn't make fun of me all the time.

College, shmollege - you should have figured that one out in HS - she probably has a crush on you.

Posted by: alex on May 21, 2008 at 4:03 PM | PERMALINK

These kind of statistics always bug me because people read into them implications that really aren't there.

Here's a made-up statistic just for the purposes of illustration: Suppose that we discovered that a graduate of an Ivy League school (Harvard, Yale, Princeton, etc.) has an average salary $100,000 more per year higher than a graduate of a public university. Does that mean that a student can improve his salary by going to an Ivy League school?

Not necessarily. It could be that there is a certain class of people (pun not intended) that are both more likely to be rich, and more likely to go to an Ivy League school. For example, the children of rich people are more likely to go to the Ivy League, and are also more likely to be rich themselves. That would explain the correlation, but would not imply a causal relation.

Posted by: Daryl McCullough on May 21, 2008 at 4:11 PM | PERMALINK

Alex,
I don't have a crush on Thersites. Its just that he is such an easy target for snark.

Posted by: optical weenie on May 21, 2008 at 4:12 PM | PERMALINK

There are exceptions, of course, but a lot of life's destiny even here in America is due to the accidents of birth. -Thersites

Ah yes, the lucky sperm club which has given us such comedy as Paris Hilton. Heh.

Posted by: Jet on May 21, 2008 at 4:16 PM | PERMALINK

optical weenie: I don't have a crush on Thersites.

Yeah, yeah, that's what they all say.

Posted by: alex on May 21, 2008 at 4:16 PM | PERMALINK

MNPundit: thanks, you actually made me laugh out loud. Don't worry, before your graduate experience is over, your ego will be utterly destroyed. Your Major Professor/faculty adviser can then rebuild you in his/her image.

The truth is, we just don't hire people with graduate degrees around here. They're too highly specialized, they want too much money, and most of them are quite content with their position at Starbuck's.

Posted by: Dave Brown on May 21, 2008 at 4:23 PM | PERMALINK

jer: the lucky sperm club which has given us such comedy as Paris Hilton.

And such tragedy as GW Bush.

Posted by: thersites on May 21, 2008 at 4:31 PM | PERMALINK

I received an MBA from a reputable state university 25 years ago, a degree I paid for myself while incurring only minimal debt after graduation. That's almost impossible these days.

In addition, if I were the parent today of an 18 year old with no more than average academic skills, I would discourage them from attending college. As more white collar jobs follow the manufacturing jobs overseas, being a plumber or an electrician seems both more secure and more lucrative than being, say, an actuary or a middle-manager of some sort.

Too bad there are so few apprenticeship opportunities for non-college bound kids. Maybe we ought to be more worried about who's going to repair our cars and install our toilets than who's going to college.

Posted by: Mandy Cat on May 21, 2008 at 4:39 PM | PERMALINK

Here's another reason why more people aren't getting college degress. Back when college got you an extra 30% and a deferment from being shipped to Vietnam, everyone who could afford college went. In the years since, regardless of a degrees effect on potential future earnings, skyrocketing costs have simply kept college out of reach for most people. It's not that they're deciding not to go to college, it's that they can't afford college.

In both '73 and '08, pretty much everybody who can go to college does, the problem is that there has been very little done to extend the opportunity beyond a limited pool of realtively affluent potential students.

Posted by: Chesire11 on May 21, 2008 at 4:40 PM | PERMALINK

I paid for myself

Even public, land grant universities are too expensive today for working students to attend without taking out large loans. Maybe even community colleges are, too. It must be almost impossible for a young person to work their way through college with hardly any student loans these days, which probably discourages many students from considering a university education. That might help explain that highly publicized drug bust at San Diego State recently. The only way working students can pay for college these days without loans is by working in the more lucrative black market.

Posted by: Brojo on May 21, 2008 at 4:51 PM | PERMALINK

I think the cost of college has a lot to do with it. There was recently an article in my local paper about the local branch of the state university. It's a large campus with about 32,000 undergraduates. About 65% of the undergrads there go into debt to finance college, and of those the average debt is about $18,000.

One would hope that the typical college student can understand the long-term benefit of a degree. That still doesn't solve the problem of how they cover a $300/month or higher student loan payment on a starting salary. Of course, that assumes a person paying their own expenses, not someone who goes back home to live with their parents.

That also assumes a typical undergraduate from a relatively low-cost state school. Private school costs are commonly $25,000/yr and up. My own alma mater was $15,000 in 1988, and it's $36,000 for 2008. Generally speaking, an undergraduate degree isn't worth going $50,000 into debt for.

Posted by: Joe Bob on May 21, 2008 at 4:59 PM | PERMALINK

If I were to have to go back to working in an office I would jump out the window due to the incessant gossip and ritual back stabbings that occurred there.

Heh.

EnnyHooo, I'd rather work outdoors and with my hands as money was never a motivating factor.

Posted by: Jet on May 21, 2008 at 5:08 PM | PERMALINK

Brojo, San Diego State isn't that expensive; it costs about the same as all the other Cal State colleges and universities. The drug bust can be explained by a fraternity and party culture there that is unlike any other in the Cal State system. If this theory were true, we'd have more dealers at Harvard and more pimps at USC.

Wait...

Posted by: Jim 7 on May 21, 2008 at 5:15 PM | PERMALINK

Brojo, San Diego State isn't that expensive; it costs about the same as all the other Cal State colleges and universities. The drug bust can be explained by a fraternity and party culture there that is unlike any other in the Cal State system. If this theory were true, we'd have more dealers at Harvard and more pimps at USC.

Wait...

Posted by: Jim 7 on May 21, 2008 at 5:16 PM | PERMALINK

There are several probable influences going one here. The most obviously is that it is financially more difficult than it used to be. Another reason is the perception that the good jobs are going to be outsourced, so why beat your head against the wall, only to find the jobs have been shipped half way around the world. I think young people greatly overestimate the threat of outsourcing, but the fear is real, and has an effect. And others have mentioned that the marginal student probably doesn't have the confidence that he will do well in college anyway -so he knows that there are no guarantees either way.

Posted by: bigTom on May 21, 2008 at 5:30 PM | PERMALINK

Jim 7, you may want to read Michael Crichton's novel Dealing or the Berkeley-to-Boston Forty-Brick Lost-Bag Blues. By the early Seventies Ivy League (non-legacy) students had already figured out how to pay for school. The fraternity/party culture theme of the San Diego State drug bust was created by the media for popular consumption, no real journalist investigation was done to analyze the real reasons why those students were selling drugs. No doubt the drugs were being purchased by the frat and party subcultures, but the real reasons why college students were selling drugs will not be broadcast on any national media because it contradicts the popular platitude that drug users are bad and need to be punished severely.

Posted by: Brojo on May 21, 2008 at 5:40 PM | PERMALINK

Computer science enrollment is down by 70%. Could outsourcing be an issue with kids choosing college? They not only face debt, which is scary, but the very real prospect that they won't have stable secure jobs with which to pay off that debt.

We're supposed to be all gung ho about globalization's benefits. But if you're not in the elite, it's a lot more risk than reward.

If society wants the benefits of a well-educated workforce (if those elites want that) they better pay up. Pay up or shut up.

Posted by: dissent on May 21, 2008 at 5:40 PM | PERMALINK

So if the economy really grew and ordinary wages have been stagnant or down since 1973, "where did all the money go?" I just want to hear it again, thanks.

Posted by: Neil B on May 21, 2008 at 5:59 PM | PERMALINK

Neil,
Thersites took all of the money so he could put a down payment on his Ford Extinction. Blame him.

Posted by: optical weenie on May 21, 2008 at 6:11 PM | PERMALINK

What an utterly depressing view on the reason to go to college - to make more money. How materialistic and immature. You should go to college if it helps you learn something you want to learn, regardless of whether it boosts your later income or not.

Posted by: DanM on May 21, 2008 at 6:24 PM | PERMALINK

What an utterly depressing view on the reason to go to college -it's all about the money? Really? How materialistic and immature. You should go to college if it helps you learn something you want to learn, regardless of whether it boosts your later income or not.

Posted by: DanM on May 21, 2008 at 6:26 PM | PERMALINK

DanM,

I agree with you completely but yours seems to be a minority viewpoint these days. I think it's getting harder to be idealistic. When I lived in Cambridge it was a stock joke that you needed a PhD in Philosophy to drive a cab there. Yet the ones I knew were content with their lives. But then it became impossible to afford to live in Cambridge on a cab-driver's salary.

And I wonder, too, if a college education really adds to a person's productivity -- outside specialized areas, such as the sciences, which really do require a long course of study -- or is just a matter of credentials. Are businesses run by people with Business degrees really better run?

Posted by: thersites on May 21, 2008 at 6:40 PM | PERMALINK

When I tried to explain to someone why it was important to understand what happened at Abu Ghraib, for example, she wondered out loud how that knowledge was going to improve her or mine material well being. This person was making the career transition from book keeper to holistic healer, and with whom I had experienced a mock prison experience simlilar to the Stanford Prison Experiment back in our church youth league days, which was why I called her. I do not think she understood the lesson.

Posted by: Brojo on May 21, 2008 at 7:00 PM | PERMALINK

One of the main reasons that high school grads are seeing traditional non college careers offer less and less is that these workers are competing with immigrants who are willing to work for less and less. There is no easy solution for this problem because many sectors in the economy (construction, meat packing, restaurants, and most service jobs) have become dependent on these cheap workers. Until we develop the will to challenge these special interest and put some teeth in legislation to punish employers who hire illegals, high school grads entering the workforce are going to be looking at a future which offers less and less.

Posted by: sparky on May 21, 2008 at 7:05 PM | PERMALINK

DanM, Speaking as someone who has a BA with majors in English and Studio Art, I didn't take a very utilitarian view of undergrad myself. So, in spirit, I agree with your point of view. Also, I finished my BA with debt, but a very reasonable amount.

That said, someone matriculating in 2008 has to do a cost/benefit analysis very different from the one I had to do twenty years ago. A person graduating from my alma mater this year, with an amount of debt proportionate to what I had, would be $32,000 in the hole.

$32K is one hell of an anvil for a 21-year-old to drag around just for learning's sake. Debt repayment on that equals a car payment+insurance or half a month's rent.

Likewise, one can devote college to love of learning, but if the result is a $400/mo debt payment for 10 years that will limit your personal choices just as well. Someone interested in a service profession or the non-profit world would be facing a very austere lifestyle.

I agree that treating college like a bigger, better vocational school is a little crass, and it saddens me that students today don't have equal access to the opportunities I had. However, materialistic and immature are very unfair epithets for people who don't have many happy choices in front of them.

Posted by: Joe Bob on May 21, 2008 at 7:08 PM | PERMALINK

The opportunity costs of taking a night class for pleausre or profit at a community college for a mature adult are very high for most median wage income earners. When I first went to college, a CC, there were retired people taking classes, too. I wonder if many pensioners are taking college classes for improving their minds now?

Posted by: Brojo on May 21, 2008 at 7:25 PM | PERMALINK

thersites wrote: "But then it became impossible to afford to live in Cambridge on a cab-driver's salary." - Right, but why in a "growing economy" where wanks like George Will or Kat Parker think people complain because they have nothing better to do, do so many of us have less? If the economy really grew in any civilized sense, growing per capita GDP would *have* to mean that it was ever easier for cab drivers or whatever to live just about anywhere. Population pressure is part of it, we've heard "obvious" answers but I still want to bring it up because it needs to be, week after week.

PS: You are the "thersites" of blog fame, also as "thers"? Good work.

Posted by: Neil B. on May 21, 2008 at 8:00 PM | PERMALINK

Thersites, I agree, the pressures to compromise oneself and go for the money are getting higher and higher, as our social safety net erodes and financial risks to the individual increase.

As for the MBA's value, I agree with you on that, too, and my college career counselor used to say the same thing.

Joe Bob, I actually don't have a problem with treating college as a kind of vocational school, I have a problem with treating it as a money maker. As you say, in addition to learning for money's sake there's learning for the love of learning, which is fine, but there's also learning for the love of doing. If you grow up loving to draw, college classes can help you draw better. If you love playing an instrument, you can learn to play better in college. If you love studying animals, college can help you become a better biologist. If you love to put things together, it can help you be a better engineer. Etc. To say it's OK for poor people to just go after money is patronizing to them. There's more to life than that, and it's not elitist to acknowledge it.

Posted by: DanM on May 21, 2008 at 8:22 PM | PERMALINK

$32K is one hell of an anvil for a 21-year-old to drag around just for learning's sake. Debt repayment on that equals a car payment+insurance or half a month's rent.-Joe Bob

It's the cost-you've nailed it. Also, employers didn't used to be so picky about WHAT the undergrad degree was in as they are now. You also have a situation where money moves faster and changes the demand for skills a lot more frequently (a fickle labor market). Trying to forecast several years out is becoming more of a moving target. The risks keep growing as a result. A safer bet might be a relatively quick 1-year certification or a 2-year technical degree that you would sink a lot less money into.

Posted by: Doc at the Radar Station on May 21, 2008 at 8:34 PM | PERMALINK

Correlation isn't necessarily causation. IMHO the drop in average high school grad's income was caused by an enormous increase in illegal aliens who are paid very poorly.

Also, a reasonably bright American high school graduate can earn good money in many fields, like plumber, electrician, auto repair, or long-haul truck driver. Note that graduation from college tends to correlate with general ability, so the grads are on average superior workers.

Posted by: ex-liberal on May 21, 2008 at 8:38 PM | PERMALINK

You forgot: "2006: high school grad makes $31K, college grad makes $61K, minus thousands in interest on college loans".


Posted by: Joe Buck on May 21, 2008 at 8:55 PM | PERMALINK

Who has the money to go to college? Not everyone has parents who saved up for them to go. Also college doesn't guarantee you a job. I have a friend with a masters degree in marine biology, she sells fireplaces for a living.

My brother has about $50k in student loan debt at exorbitant usurious interest rates from Sallie Mae. He hasn't been able to find a good paying job in his field and worse, he can't afford to buy a car, much less a home, because he's saddled with over $800 a month in student loan payments which he'll be paying to infinity and beyond. They don't even tell you what the estimated payments will be on the loan paperwork, like you would see on a car or house note, you don't find that out until you reach the repayment period. (how is that even legal?) Thats when terms like "capitalized interest" start to take on real meaning.

I know a lot of kids in their mid-late 20s with crushing student loan debt like this. The vast majority of them will never, ever catch up.

Posted by: lellis on May 21, 2008 at 9:39 PM | PERMALINK

*** Correlation isn't necessarily causation. IMHO the drop in average high school grad's income was caused by an enormous increase in illegal aliens who are paid very poorly. ***

Amen, Brother!!!

As long as the Wall St Plutocracy has unlimited slave labor to exploit in the form of illegal aliens from Mexico, the working class in this country is screwed.

The old Democratic Party would have cared about this – the new version doesn’t care because it sees all this imported poverty as votes. The logic seems to be that if you import enough poverty and unskilled labor then misery will increase in this country enough that the US will turn to socialism. Yahoo! I can't wait.


Posted by: Midwest Yahoo on May 21, 2008 at 10:26 PM | PERMALINK

Neil B: PS: You are the "thersites" of blog fame, also as "thers"? Good work.


Um, no. If you mean "thersiteswrites.blogspot.com" that's someone else. I use the name "thersites" to comment here and at a few other political blogs, mostly at Blue Girl's blog.

Posted by: thersites on May 21, 2008 at 10:57 PM | PERMALINK

lellis, good point. I've repaid four student loans over two decades. I remember saving money for a house down payment (working OT and going to school at the same time) and took about half of it to pay off my last student loan, but I had a vehicle crap-out on me within a week and I stopped payment on the check so I would have a down payment for a decent vehicle. Many people don't realize the financial struggles that go on to get through school.

Got to mention this, but when Reagan cut the student loan program drastically it really hurt a lot of people. Try getting PELL money now? HA!

Posted by: Doc at the Radar Station on May 21, 2008 at 11:00 PM | PERMALINK

Jeebus. There are thersiteses everywhere.

http://vichydems.blogspot.com/

I never googled my handle before.

Posted by: on May 22, 2008 at 12:12 AM | PERMALINK

It would be interesting to see a breakout of incomes for graduates with "real" degrees - hard sciences, engineering, accounting, etc. - and those that drifted through with a chump liberal arts major. I'd also like to see a breakout of graduates 25 and under and the massive number of college students that are on student loan welfare; say the 28 to 38 year old losers that don't have the self discipline to take the post office exam.

Posted by: loki on May 22, 2008 at 12:34 AM | PERMALINK

The University of Texas costs about 17k per year these days for Texas residents. Applying for aid gets you a loan application. Private schools like Cornell, Colgate, RPI, U of Rochester cost around 50k with a much greater likelihood of receiving aid. My SWAG is that the middle class financial obligation for 4 years of education at a major university, public or private, is 70k-80k.

It is really impossible to look at a mortgage equivalent debt and then go to college for warm and fuzzy personal growth reasons. College is now a class sorting mechanism and that is the way the powers that be want it. I think the Republican party really likes expensive universities and toll roads (yet another sorting mechanism.)

It is really tough to weigh the cost of college plus the opportunity cost of not working vs. a possible long term advantage for a college degree. That degree does not guarantee a good job and the break even point for many that do succeed is age 40.

Posted by: Nat on May 22, 2008 at 12:52 AM | PERMALINK

loki: chump liberal arts major

I could resent that. What is it, exactly, that makes liberal arts a "chump" major? I majored in English (although I didn't finish) because I love the language. I work as a programmer because it pays the bills.

Posted by: thersites the chump on May 22, 2008 at 12:55 AM | PERMALINK

One of the main reasons that high school grads are seeing traditional non college careers offer less and less is that these workers are competing with immigrants who are willing to work for less and less. There is no easy solution for this problem because many sectors in the economy (construction, meat packing, restaurants, and most service jobs) have become dependent on these cheap workers. Until we develop the will to challenge these special interest and put some teeth in legislation to punish employers who hire illegals, high school grads entering the workforce are going to be looking at a future which offers less and less. Posted by: sparky What did you think the purpose of immigration was? To compete globally business wants a Chinese or Indian type of labor force, so the plan is to quickly double or triple the population of the US to drive down wages.

Posted by: on May 22, 2008 at 12:58 AM | PERMALINK

Let's see Political Science & English as an undergrad work in the DC region for six years; earning in the 50-60K as a proposal writer/tech editor/security clearance manager, and whatever else that needs doing.

And I'm going back for my MBA concentrating in Project Management & Information Assurance.

Why? Because while I'm good at editing, I'm not thrilled with it, and this is the easiest way to career shift. Plus I'm starting to hit the top of my earning potential in this field in this area.

Posted by: DecidedFenceSitter on May 22, 2008 at 6:38 AM | PERMALINK

College is now a class sorting mechanism and that is the way the powers that be want it.

Posted by: Nat

Exactly. America views itself as the land of equal educational opportunity, but the data show clearly that higher education is no longer the path to the middle or upper class.

College-qualified high school graduates (at least Trigonometry) from low- and moderate-income families are facing record level prices (net of all grant aid) and loan burden at 4-year PUBLIC colleges and universities. They are enrolling in 4-year colleges today at a far lower rates than two decades ago.

Of course family background and academic preparation in K-12 are big factors. But when one controls for them as best as possible, college prices and inadequate need-based grant make a HUGE difference.

Higher education has clearly become an engine for greater income inequality.

Posted by: Econobuzz on May 22, 2008 at 10:05 AM | PERMALINK

Standard economic theory predicts that this should lead to way more people getting college degrees, but that hasn't happened.

Not without a whole lot of assumptions, many of which are self-evidently false, it doesn't.
Posted by: cmdicely

Exactly so.

Dean Baker and David Sirota regularly beat the stuffings out of the 'Education Myth'.

When every kid, regardless of academic accomplishment or ability, is expected to get a college degree (for a job that any reasonably competant high school grad used to get) the value of everyone's degree, save those gilded and lucky few who can attended elite schools, is debased.

It's Ed Inflation.

'In the United States, the middle class feels imperiled because ... well, because it is imperiled. Politicians, economists and the richly paid pundits keep telling us that the American economy is robust and that people's financial pessimism and anxieties are irrational. At the kitchen table level, however, folks know the difference between chicken salad and chicken manure. Yes, these are boom times for the luxury class, but the middle class is imploding.' - Jim Hightower
Posted by: MsNThrope on May 22, 2008 at 11:29 AM | PERMALINK

1973: high school grad makes $42K

On what planet was this?

.

Posted by: agave on May 22, 2008 at 11:30 AM | PERMALINK

1973: high school grad makes $42K

On what planet was this?

.
Posted by: agave

Yeah. I graduated from college in '74 and distinctly remember the median starting wage being around $12k. Lower in the South and there was a recession on, too.

But $42k in 1974 would be $206021.30 in 2007.

And that's using the BLS's BS numbers.

Kevin just doesn't understand inflation.

Posted by: MsNThrope on May 22, 2008 at 11:46 AM | PERMALINK

It's Ed Inflation

Is not that true for HS education, too? Does not a universal kindergarten education reduce the value of everyone's kindergarten degree?

Education is a public good. The more education people receive, the more better off everyone becomes. The almost free state subsidized university degrees of the Sixties and Seventies produced the great econmic growth of the Eighties and Nineties. Universal education makes us all wealthier. The reduction in growth of higher educated citizens reduces our overall welfare, which seems to be what those controlling our society want.

Posted by: Brojo on May 22, 2008 at 11:53 AM | PERMALINK

"The first panacea for a mismanaged nation is inflation of the currency; the second is war."
-- Ernest Hemingway, Esquire magazine, September 1935

“The most powerful force in the universe is compound interest”
- Albert Einstein

And inflation is compounded like all get out.

$42k in 2007 would equal $8.8k in 1974...

Posted by: MsNThrope on May 22, 2008 at 11:56 AM | PERMALINK

I never googled my handle before. - Thersites

Pervert!

Posted by: optical weenie on May 22, 2008 at 1:14 PM | PERMALINK

I want to second(or third) DanM's point: college is not just about money. In fact, as a grad of a decent liberal arts school (with plenty of loans still), I can say that my motivations for college had little to do with money. Rather, visions of booze, weed, girls, and sitting around debating philosophy greatly appealed to me.

Someone earlier made the point that you decide to go to college early in life: this is very true for me and nearly everyone I knew at college. I went because it was just expected of me and my siblings. My parents never said it, it was just implied. I did well in school because I was going to college. Expectations can dictate so much. Though I and my sister did well in school, my brother eventually dropped out as it just wasn't for him, but college was just always an expectation for a middle class family like mine. I didn't go because I sat around calculating the returns of a degree, I went for the experience, and more importantly, the prestige and approval from my parents that came with a degree. My brother, whose a smart guy who just didn't fit with college, feels (wrongly) inferior because he didn't get a degree. I think thats a big part of the motivation for going to college. Its a prestige builder, a ticket to the "educated class" regardless of how much money you make. People privileged enough to go to college thus go for prestige and the booze filled experience, not for money. Pretending such calculations are motivation for many college grads is missing a huge chunk of their mental equation.

Posted by: David on May 22, 2008 at 1:22 PM | PERMALINK

I want to say, as an economics major, that you ought to stop thinking like an economist. People (especially teens) are not rational, utility-maximizing, self-interested individuals. Their decisions about college are as much a function of cultural factors as they are of cost-benefit analysis. While I do not know which cultural factors in particular could explain this trend (one might ask a sociologist), I suspect that the stagnant growth of college graduates could be a function of the Idiocracy effect (see Mike Judge's wonderful movie). All I'm saying is that standard economic theory is a piss-poor predictor of actual human behavior because, unlike economic man, people are not robots.

Posted by: Geoff on May 22, 2008 at 1:35 PM | PERMALINK




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly