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Monday, May 9, 2011

Is your BA really BS?


I've written before about how higher education is the next bubble, and I'm glad that Mark Schneider of AIR has done some research on behalf of AEI to really hit the nail on the head. Here are your talking points, folks:

average lifetime earnings advantage for college graduates is well below the million-dollar figure when forgone wages and the cost of a college education are factored in.

  • Incorporating those figures and using the Department of Education's 2003 Baccalaureate and Beyond Longitudinal Study, Schneider estimated that the lifetime earnings advantage for college graduates ranges from $150,000 to $500,000.
  • The differences reflect earnings from open admissions schools to selective private schools.

And of course the premium isn't consistent across industries or employees:

  • The Census Bureau's 2009 Current Population Survey shows that 20 percent of individuals making less than $20,000 per year have bachelor's or master's degrees.
  • Recent graduates, age 24 and under, are experiencing a jobless rate of nearly 10 percent.

Even more problematic for future generations is that the gains from college aren't growing over time.

  • In 1991, young workers with bachelor's degrees earned, on average, 1.48 times the amount that those with only high school diplomas earned.
  • Young college graduates' earnings peaked in 2000 at 1.68 times that of diploma-holders, then declined to 1.54 percent in 2009.
  • Keep in mind that the price of tuition increased nearly 300 percent during this same period.

Right now, a bachelor's degree is still a good option for many students. However, as prices continue to rise and gains in academic achievement and lifetime earnings stagnate, the bubble -- the discrepancy between cost and value -- will inflate further.

I'm dreading the day when it will burst, though.
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  1. Suggestion: read great books, but don't spend your time in college doing it as a major.

  2. " * The Census Bureau's 2009 Current Population Survey shows that 20 percent of individuals making less than $20,000 per year have bachelor's or master's degrees.
    * Recent graduates, age 24 and under, are experiencing a jobless rate of nearly 10 percent."

    Taking data from a bad recession is not exactly useful. At a minimum you should compare the percentage of those without degrees in 2009 who made less than 20k a year to those with degrees. Better would be to use data from what is not an atypical bust period for the economy.

  3. Besides the mirage of high salary, high debt and indoctrination are also additional factors to question the value of a college education.

  4. These stats don't reflect today's high unemployment figures. Most graduates are in the 18-26 age range, which currently has a 25%+ unemployment rate, whether having a bachelor's degree or not; with a degree, is it still 10% today? Doubtful.

    Also, I would say that even a B.S. is "BS" (note the article says "...Bachelor's Degree..." which includes both a BA and a BS).

    I get why you chose the cutesy/clever title, but the article implies that ALL college undergraduate degrees are in the same boat.....are any of them worth the cost?

    I have maintained for years (to many of my friends' chagrin) that you need to weigh the cost/benefit of college for the career path of the individual. Anathma to those who buy the liberal line that college is "essential" to "success" in "our modern global economy" blah blah blah. Only if you must have one to get a job in the desired field (e.g law, medicine, engineering, teacher/professor) is it "essential."

  5. This doesn't seem to factor in several other aspects; specifically the enjoyment factor. College is a lot of fun for pretty much everyone that immerses themselves in it. That's at least somewhat of a mitigation factor for the cost of it. Also, I doubt most of the jobs you can get with only a HSD are fulfilling enough for many of the people who choose college. It's true many people are pressured into it that might not otherwise go, and that should change. I am speaking from the perspective of a PhD candidate in Physics. I'm sure my forgone wages are well above $100k by now at age 28, but I'm happy with what I've done, and that's hard to measure in this kind of study.

  6. Tuition at universities in Washington State have gone up 40% over the last 3 years, and the fringe left nutters running the Legislature have just given them unlimited tuition setting authority... combined with allowing my alma mater the right to cut in-state slots by 150 for the next class in favor of illegal aliens and out of state students... as if our taxes didn't go to support these dens of inequity enough. http://seattletimes.nwsource.com/html/localnews/2014986635_tuition07m.html

    It's like giving an oxy-addict the keys to the pharmacy. And the end result will be the pricing out of the market most students not considered "rich," or the provision of yet another generation of graduates sunk under an additional layer of debt beyond that which they already bear from Obama.

  7. Kathleen, it would seem that there is a glut of college educators and it shouldn't be long before very cost efficient degree programs can be established that use distance learning for the large majority of the school/student relationship. I think the problem will be the status quo loving gate-keepers at the accreditation bureaus. If groups like the US Chamber of Commerce can be encouraged to evaluate and endorse low cost distance learning degree programs, then the accreditation gate-keepers will become irrelevant. Of course it will be difficult to field a football team and fill a stadium with distance learners -- and it will be even harder to fill out a schedule if everyone goes to Google U.

  8. Academic inflation would seem to mirror health care inflation in its frequency and severity. I wonder if they may share a common root cause, ie. distancing market forces from the equation.

    The majority of health care is paid not by the individual patient, but by an insurance company or county, state or federal government.

    Likewise in this age of grants, tax credits and government backed tuition loans, direct immediate cost to the student and his family whether by paying directly out of pocket or through merit to gain a scholarship have been minimized.

    When a student and his family are not required to put up front much of their own stake in education, it seems inevitable that the value of an education would be cheapened. Look at what has happened to housing prices since the advent of 0% down subprime mortgages.

  9. Since 1982 higher education costs have gone up 439% while the average family income has increased only 147%. (see page 10 of this study: http://www.webcitation.org/5yId89Igj)

    Not to mention that 40%+ of entering students don't get a degree. (http://www.nytimes.com/2010/07/23/education/23college.html) So, it's wasted time and debt for them.

    As you point out, Kathleen, even for the favored 60%, it's not peaches and cream.

    U.S. higher education is a bloated, overpriced, incompetent system that is just starting to face much needed tough questioning.

  10. Kathleen, another thing I found interesting; checking on the starting salaries of law school graduates, I learned that a graduate of Harvard Law School (which produced Obama) makes a couple of hundred less a year in starting salary than a graduate of the University of Texas Law School. But tuition for Harvard is about three times the tuition for UT.

    What is happening is that the loans, etc, are making a university education available to even those who should persue other fields of labor. When everyone has a Bachelor's degree, it won't be worth the paper it's written on. Me, I would rather see my son become a journeyman plumber @ $40/hr.

  11. The ludicrous claim that everyone needs a college degree has been echoed by Obama ad nauseam. I think its just his way of saying "go back to school, and stay under the unemployment radar - please!"

    It does make me wonder, however, once everyone has their doctorate, who will pick up the garbage? Or will that Ph.D stand for "post hole digger"?

    So many questions, and May 21st just around the corner...

  12. College is a big waste of time and money. It is fundamentally immoral to tell young people they must start out life so grossly deep in debt that they are literally owned by the banks for the rest of their lives.

    The college degree myth also demonstrates a certain disdain for the trades common in our pretentious society of elites and elite-wanna-bes.

    While every suburban couple is relieved when the plumber fixes the leak, they are horrified at the thought that junior might end up being a plumber someday. Why? Because they have been sold a lie by colleges and universities and the banks. Junior goes off and wastes four years of his life, flushes thousands of dollars down the tube, and then starts out as an unpaid intern competing with a dozen other unpaid interns for a job that starts out at $25k a year. He does this while trying to pay thousands back in student loans, or Mom and Dad are struggling to pay a second mortgage when they should be putting that money away for their retirement.

    Meanwhile that plumber that fixed Mom and Dad's leak, he's making $40k-$50k a year, has no student loans, and can feel something that junior will never feel after a hard day of shuffling paper and answering endless phone calls... satisfaction in a job well done.

    This is coming from someone with a Master's degree, 42 years old and working for $42k a year at a job that has nothing to do with his degree, is high stress, low satisfaction, and just plain cubicle miserable.

    I wish I had went out to the garage when I was a teenager and learned how to work on cars with my Dad who was a mechanic and millwright, and is now happily retired and satisfied with a job well done.

    The college myth is ruining lives and our culture.

  13. "This doesn't seem to factor in several other aspects; specifically the enjoyment factor. College is a lot of fun for pretty much everyone that immerses themselves in it. That's at least somewhat of a mitigation factor for the cost of it."

    There's so many things that can be said about that, but I'll leave it with just this one comment:

    You can say the same thing about a casino, but if someone were to spend upwards of $40k a year in a casino, you would have to conclude that that person has a rather serious problem.

  14. Not that my example is one to go by, but I went to college when writing a term paper meant typing it on a manual typewriter (good for me, a lousy typist, that white-out had just been invented!).

    Anyway, I had a scholarship, and lived at home, so my education for four years cost me only the price of fees and books, but even if I'd paid the the tuition, it would have been about $5000 for all four years.

    I've out-earned that by orders of magnitude. I'm very blessed to work as a technical writer decades after earning a Bachelor of Liberal Arts, English Major. I've always been able to find a job doing SOMETHING.

  15. How do these stats break out by major? As in, what is the payoff for majoring in engineering or math vs majoring in womyn's studies?