Will a College Education be Worth the Investment in the Future?
Yves Smith at Naked Capitalism has a good post on the declining economic value of college, and the looming danger of massive student loan defaults. Shockingly, a full 50% of college graduates are winding up underemployed:
Take note: half the recently-minted college grads are in jobs that do not require a college degree.
Now if these graduates were going to college for the mere love of learning, and didn’t mind working at Home Depot because they could work on a novel in their garret, this picture might not be quite as terrible as it looks. But I sincerely doubt that anyone in the US goes to college to become a working class intellectual.
But the economic (as opposed to social and personal) value of higher education is exaggerated. The widely-touted College Board claim that lifetime earnings for college grad outpace those of mere high school grads by $800,000 does not stand up to scrutiny. The author of the 2007 study which the College Board relied upon disclaims that estimate and says $450,000 is a better figure. Mark Schneider, a vice president of the American Institutes for Research, who used actual earnings data of graduates ten years after college, and allowed for other factors such as taxes, pegged the difference at $280,000.
And these estimates are averages. Students who are drawn to fields such as architecture, which require advanced education but are not terribly well paid, will fare less well.
Also, check out this September 2009 post on BusinessWeek‘s blog, which includes the “appalling” graph below:
Unfortunately, I think there is every reason to believe that the problem will get worse. Technology will increasingly be leveraged to automate the knowledge worker jobs that are often taken by new college graduates, and this is likely to hit especially hard at the entry-level.
I also think the future impact of offshoring is underestimated. We cannot escape the reality that intellectual capability within the population is subject to a normal distribution. This implies that, collectively, India and China have more smart people…than the United States has people. In the future, technology will make it even easier for the millions of people on the right flank of Asia’s bell curve to compete directly with Americans for knowledge-based jobs.
Here is a section from The Lights in the Tunnel in which I discuss the future of college education:
Nearly everyone agrees that a college degree is generally a ticket to a brighter future. In the United States in 2006, the average worker with a bachelor’s degree earned $56,788, while the average high school graduate earned a little more than half this amount, or $31,071. Workers with graduate or professional degrees earned a still higher average salary of $82,320. While the primary motive for the majority of individuals to pursue advanced education is almost certainly economic, we would all agree that education also conveys many other benefits both to the individual and to society as a whole. A person with more education seems likely to enjoy a generally richer existence, to have an interest in a greater variety of issues and is perhaps also more likely to be focused on continuing personal and professional growth. A more educated society is generally a more civil society with a lower crime rate. An educated person is likely to hang out in the library—rather than on street corners.
The unfortunate reality, however, is that the college dream is likely at some point to collide with the trends in offshoring and automation that we have been discussing in this chapter. The fact is that college graduates very often become knowledge workers. As we have seen, these jobs—and in particular more routine or entry level jobs—are at very high risk. The danger is that as these trends accelerate, a college degree will be seen increasingly not as a ticket to a prosperous future, but as a ticket to a job that will very likely vaporize. At some point in the future, the high cost of a college education, together with diminishing prospects for college graduates, is likely to begin having a negative impact on college enrollment. This will be especially true of students coming from more modest backgrounds, but it will have impact at all levels of society.
This is, obviously, a very unconventional view. Most economists and others who study such trends would probably strongly argue exactly the opposite case: that in the future, a college degree will be increasingly valuable and there will be strong demand for well-educated workers.
This is essentially the “skill premium” argument—the idea that technology is creating jobs for highly skilled workers even as it destroys opportunities for the unskilled. I think the evidence clearly shows that this has indeed been the case over the past couple of decades, but I do not think it can continue indefinitely. The reason is simple: machines and computers are advancing in capability and will increasingly invade the realm of the highly educated. We’ll likely see evidence of this at some point in the form of diminished opportunity and unemployment among recent graduates and also among older college-educated workers who lose jobs and are unable to find comparable positions.
We may not see an actual closing of the gap in average pay for college v. non-college graduates because opportunities for workers of all skill levels are likely to be in decline. I am not suggesting that high school graduates who would have otherwise gone to college will chose to remain completely unskilled, but I do think there is likely to be a migration toward relatively skilled blue collar jobs if there is a perception that these occupations offer more security.
As new high school graduates begin to shy away from a course leading to knowledge worker jobs, they will increasingly turn to the trades. As we have seen, jobs for people like auto mechanics, truck drivers, plumbers and so forth are among the most difficult to automate. The result may well be intense competition for these relatively “safe” jobs. As high school graduates who might previously have been college-bound compete instead for trade jobs, they will, of course, end up displacing less academically inclined people who may have been a better fit for those jobs. That will leave even fewer options for a large number of workers.
We see evidence of this trend already in the daily news. Newspapers routinely report that people are specifically seeking jobs that can’t be offshored. Much is made of new “green collar jobs that cannot be outsourced.” While this is certainly a desirable development, we have to acknowledge that the bulk of these jobs are going to involve installing solar panels, wind turbines and so forth. They are trade jobs; not jobs for college graduates.
The cost to society of such a turn away from education would be enormous. It would damage the hopes, dreams and expectations of our children and potentially rob them of things that we ourselves have come to take for granted. Those workers whose prospects were diminished by a new influx of more “book smart” competitors would become even more dispirited and more likely to turn to crime or other undesirable alternatives. This hash new reality would fall most heavily on people in disadvantaged sectors of the population. Finally, and perhaps most chillingly, a trend away from college would rob us of talent we may well need in the future.