Are Too Many Young People Going to College? Becker

 

During the past 30 years, higher education has boomed worldwide. Virtually every country has significantly increased the fraction of its young men and women who go on for a college or university degree. The higher education boom is just as large in developing countries as it is in developed countries, although naturally poorer countries still lag behind in the fractions of young persons with college degrees. China is an extreme example of what has been happening in developing countries, as enrollments in Chinese universities increased several fold during past 15 years. The United States also increased its enrollments, but at a slower rate than many other rich countries. When measured by the fraction of young people with a college education, the US ranking has dropped from among the top three countries several decades ago to somewhere between 10^th and 15^th.

A worldwide trend suggests that universal forces lie behind it. In the case of the higher education boom, one major force is the introduction of computer and other technologies that give an advantage in labor markets to individuals who command information and knowledge. The rapid transfer of technologies from richer to poorer countries, partly the result of foreign direct investments, is also raising the demand for educated persons in many less developed nations.

 If the value of higher education in the modern information-oriented economy has been overrated, the sizable growth in the number of educated persons should have lowered the earnings premiums for college graduates, and raised the unemployment rates of these graduates. In fact, these earnings premiums have generally risen, not fallen, and often the growth has been large. Moreover, unemployment rates of the college-educated have remained much below those of high school graduates and high school dropouts.

In the United States, for example, the average earning of persons with four year of college increased from about 35% above the average earnings of high school graduates in 1980 to about 55% higher in 2009, despite a growth during this period in the fraction of the American labor force with a college education. The earnings premiums for persons with a post-graduate education have increased even faster over this 30 year-period. Moreover, the unemployment rates of lower educated persons have remained much higher than the unemployment rates of persons with higher education.

The rise in the earnings premiums in the United States since 1980 for college-educated persons, is consistent with growth over this period in the demand for college graduates that dominated the increases in their supply. A rise in the earnings premiums for persons with a higher education in found in most countries, except sometimes where the growth in the supply of college-educated persons has been unusually rapid, as shown by developments in China. Starting in the mid-1990s China had an extremely fast increase in the supply of persons with a college education. Since so many young college graduates entered the labor force, the earnings of young graduates dipped a little below those of young high school graduates. But the earnings of college graduates with considerable work experience continued to grow sharply, suggesting a sizable increase in the demand for college graduates with much job experience (this is based on research by James Liang of Stanford University).

This brings me to Paul Krugman’s analysis that Posner commented on. I agree with Krugman that not everyone in the United States or elsewhere will benefit from a college education, but the United States and pretty much all other countries are very far from that extreme. However, if Krugman were correct that software was replacing college educated persons on a large scale, that high wage jobs have been more “offshorable” than jobs done by the low-paid, and that college education is becoming less helpful in finding good jobs, then surely during recent years the earnings gains of college graduates should already have begun to fall behind the gains of less educated persons.

Yet since the early 1990s and even during the last decade, the facts are the opposite: the average earnings premiums of college graduates in the US, and especially the premiums of persons with a post-graduate education, have continued to increase, despite the growth in the numbers of educated persons in the labor force (this evidence can be found in “Explaining the Worldwide Boom in the Higher Education of Women” by Gary Becker, William Hubbard, and Kevin Murphy, The Journal of Human Capital, Fall 2010). So the most recent trends in the earnings of college graduates do not support the view that the US is overeducating its labor force.

All this indicates that President Obama is correct, and that America has to make greater efforts to increase the number of persons qualified to enter and finish colleges and universities. This is mainly a male problem since the fraction of American women who complete college has grown rapidly: women now receive about 60% of all four-year college and masters degrees, while men receive only 40%, whereas in 1970 women received about 40% of these degrees.

Part of the American problem results from the high dropout rates from high school, including in the dropout rate students who only get a High School Equivalency Degree (GED). These dropout rates have remained stable at about 25% of all high school students, a depressing figure relative to those in other developed countries, where dropout rates are usually below 10%. The students who are dropping out do not get good jobs since the evidence is overwhelming that the pay of dropouts is very low, and their unemployment rates are very high. Not much support in these data for any “hollowing out” of job opportunities alluded to by Krugman. Especially disturbing is that African-Americans and other minorities are vastly over represented among those dropping out of high school.

So my conclusion is that America will benefit greatly from increasing the numbers of young men and women who go to and graduate from colleges and universities. To do that, however, will require improving the preparation received at K-12 levels, including the education at the very earliest school levels for young children poorly prepared for school. The challenges are enormous, but the potential gains are worth considerable effort from public and private bodies.

 

 

 

 

 

Comments

[Mp3michael]

I'm a longtime fan of Becker but on this issue you got it wrong. Examining the economics of the cost and benefit of college reveals the median return is barely positive. But if the true value is weighed it is surely a negative median return. I say this because the fundamental flaw in logic when attempting to evaluate college is to attribute ALL of the earning difference between high school graduate and college graduate to college attendance. The smartest, most diligent, most motivated attend college and will be successful regardless of what they do so attributing that entirely to a Uni degree grossly overvalues college attendance.

To use an analogy it would be like telling people that if you want to be a great athlete then they should play college sports. Uh... duh. If you're on a college sports team you're ALREADY a good athlete otherwise you wouldn't qualify. Or to use an inverse example, recommending that people not go to prison if they wish to have high earning power.

More importantly if you quantify the actual cost/benefit of college by looking at the cost of attendance and the gains in salary using US Census data college it is barely a positive investment and for some demographics the median is actually negative! You'll find articles analyzing the data at these URLs. This data is a few years old but if anything the economics have worsened since college admission costs continue to skyrocket and wages have shown little to no growth.

http://michaelrobertson.com/archive.php?minute_id=257
http://michaelrobertson.com/archive.php?minute_id=226

If you examine the numbers more closely instead of accepting cursory claims college has already turned into a suspect investment for half current attendees.

-- MR
Michael Robertson
michael@michaelrobertson.com

[oil mill]

Learn to grow up, can't again so capricious, so naive, so childish.
Learn seriously, the earnest of the people, serious thing right.
Learn to be patient, the shut up just shut up, this silence is silent.

[Jack]

Prof Becker asks whether too many young people are going to college and seeks to answer the question only in economic terms. Perhaps tackling more is beyond the scope of a short essay, but surely there are reasons other than economics to go to college.

Quality of life used to get mentioned and wouldn't society and the individual be richer for it if a kid were going to join his dad in carpentry or apprentice as a plumber or electrician if he/she majored in business, or even English Lit or other arts? Our democracy be the better for having some poli sci, econ or history?

But back to the economics, isn't it, like the title of a recent film "complicated?" With reasons for going to college varying widely? Consider our several million teachers, at $45,000 median income surely they know that a licensed plumber or electrician will earn more and will earn apprentice pay while the prospective teacher is piling up school loans. In terms of maximizing income those in sociology, the arts, along with most in athletics are not going to earn a fortune in short order, or ever.

Then there is what TO do from 18 until one's mid-twenties? Becker touches on "lower opp costs" during recession. But without making a case for the costs of college being justified by "something to do" what would a young college eligible person do instead? Spend the four years competing with other HS or dropouts for the few crappy jobs available the pay of which may also leave the youth dependent on family or growing debt while wasting his/her youth in the typical dead-end job?

There seem other economic anomalies. One effect that would seem to "cheapen" a degree is that of employers insistence on a degree for jobs that in a tighter labor market would have been trainee positions that could have been filled by a competent HS grad.

Another is that of stagnant wages for nearly all working folk which is affecting most college grads too. For now it's like most of the workforce swimming against the tide. But with "boomers" retiring, the next decade should provide a lot of opps for those with the skills and experience to fill upper level positions.

One more? The "housing boom" (and commercial too) spurred by trillions in fraudulent banking practices meant good jobs for many who were not college grads. In addition to the crafts of construction itself, RE agents, mortgage originators, title insurance and related employees -- most often not college grads, did from pretty well to very, very well. Other than the current re-fi boomlet and dealing with the Mess, the whole sector is but a quarter of what it was at the peak.

And lastly, a question: Suppose one graduated from a prestigious and costly university, but "married well" and after a few token years of employment, became a stay-at-home spouse, how would "lifetime earnings" be tallied?

[Curt Doolittle]

Obviously the other commenters aren't actually reading Posner's posting.

His proposition is that college education does matter, but that our high schools are failing our male students.

There is nothing novel about this insight. It's in all the data. Boys are 'checking out' not only of school but out of society.

[Curt Doolittle]

er... that's Becker, not Posner. :)

Union intransigence on incompetent teachers is only part of the problem. The feminine dominance of education, their emphasis on empathy rather than the virtue of dominance, the reduction in physical activity by which males engage with the real world, the emphasis on verbal factual recitation rather than narrative and argument, the fact that teachers come from the bottom end of the graduating pool, the inability to demand discipline in the classroom, and the social demonization of male behavior are all factors.

[caveat bettor]

The ghost of Larry Summers needs to haunt this post. Not only will males dominate the most demanding roles in the most demanding fields, but fewer of us will always be as qualified for higher education, if our gender does indeed have a higher variance of intelligence.

I know he's been here before:
http://www.becker-posner-blog.com/2006/02/summers%C3%A4%C3%B4-resignation-and-university-governance-becker.html

[endorendil]

"The United States also increased its enrollments, but at a slower rate than many other rich countries."

Not all enrollments are created equal. In terms of science degrees, the US is lagging, in terms of MBAs it leads the pack. The results speak for themselves.

"the average earning of persons with four year of college increased from about 35% above the average earnings of high school graduates in 1980 to about 55% higher in 2009"

This is because people at the top of the wage scale almost invariably have college degrees, and the income of the top wage earners has been growing much faster than at the bottom. This doesn't mean that a degree has become more valuable per se. In particular, Becker is wrong when he concludes that "surely during recent years the earnings gains of college graduates should already have begun to fall behind the gains of less educated persons" if their jobs were more offshoreable or software-replaceable.

"So my conclusion is that America will benefit greatly from increasing the numbers of young men and women who go to and graduate from colleges and universities. To do that, however, will require improving the preparation received at K-12 levels, including the education at the very earliest school levels for young children poorly prepared for school. The challenges are enormous, but the potential gains are worth considerable effort from public and private bodies."

I agree that pre-college education has to be strengthened. But we need to fix the college education's underlying problems before concluding that more graduates equals a better economy. As I commented on Posner's post, I think college degrees matter because they are pre-requisites for the better paying jobs, and that they are one of the few remaining opportunities to mingle with the people that can help your career along. It's not really about the skill set, and you would not expect that as long as the threshold for entry is as much about financial wherewithal as it is about ability.

So yes, fix pre-college education so more people can develop the skills to start college, and make college *much* more affordable. Tightly monitor schools to see that they favor the most promising students in stead of those that have had the best preparation. But for the time being, don't bother getting more people into college.

[MIchael]

@Michael Robertson:

"The smartest, most diligent, most motivated attend college and will be successful regardless of what they do so attributing that entirely to a Uni degree grossly overvalues college attendance."

OR...

Could it be that many of the smartest, most diligent, most motivated have realised that college affords them greater opportunities - and earning potential - in life and have therefore made the choice to go to College? Otherwise, if what you're saying is true and College does not add that much more to a high school education, wouldn't the rational choice be to skip the three years' of college (and fees) and go straight out into the big wide world?

MT

[Jack]

MT -- My take is that of Rung #1 requiring a degree, these days often an advanced degree. The others are shunted off to where youthful "diamond's in the rough" are unlikely to get to Rung #1. Robertson makes some good points, but his screening would miss those of considerable talent whose situations didn't allow them to attend college.

During these recent decades of surplus labor industry simply uses "college" to sort applicants. Why bother to "take a chance" on an A student out of HS when there are plenty of college grads? In the 60's and 70's a tighter labor market -- with fewer college grads -- industry would have taken many promising HS grads in as trainees.

While Posner and Becker may pontificate on "too many", "costs" and all of that, I'd bet that one thing we'd all have in common is that of advising our own family members to go to college and get a degree in something or other. In a nation where upward mobility has fallen below many other industrialized nations they'd better make sure they're eligible to jump on Rung #1.

[Janos]

One of the problems is that speaking about "college" is not terribly meaningful. Caltech and the University of Southern North Dakota at Hoople and its analogs are very different.

Still, in an age of disruptive technologies, the best long term strategy for good employment prospects is to acquire the ability to master new concepts and new techniques and try to adapt to changing economic circumstances. A *quality* college education is an excellent way to do so. Employers know this: that's why they are more reluctant to hire "diamonds in the rough" with no college degree.

There ARE exceptions to the rule, especially in IT.

[Jack]

In the "too many college" discussions, we also need to understand that if ALL were able and went to college it's not a panacea for our woes nor that of stagnant and declining wages. Our economy requires LOTS of folks doing jobs not requiring college.

If, by some unforeseen miracle, "too many" did acquire college degrees and IF our economy could absorb them in their area of expertise -- the result would be, by one means or another -- waves of immigrants coming to do the lowerskilled work........... and haha! lower the percentage of college grads.

[アンドロイドエロチャット]

スマートフォンエロチャットを実際に利用したリアル体験談は攻略ブログにて掲載中。

[Pepe Fenjul Jr.]

More importantly if you quantify the actual cost/benefit of college by looking at the cost of attendance and the gains in salary using US Census data college it is barely a positive investment and for some demographics the median is actually negative.

[mav]

Nice to see Becker using "average" earnings instead of median or something more representative, to prove that the middle class is doing just fine. He's obviously a smart guy so I don't know if he's being forgetful or disingenuous here.

Mean earnings are naturally going to be distorted by the enormous sums being banked at the top which have increased exponentially recently (precisely what Krugman is referring to in terms of dumbell). When one investigates median real wages in the last decade or 2, the results are stagnant at best:

http://www.epi.org/publications/entry/bp195/

[x-pole]

I think you are wrong on this subject however everyone is entitled to their own opinion.

[Jack]

Pepe: Ha! The "C/B" ratio of the whole workforce has been bleak for decades as Mav reminds us. Truly the best thing to do is that of being born into, or otherwise clambering into the top 1% or better yet the top .1% where the real gains and MASSIVE paybacks are. Preparation might include watching a lot of pirate and mafia movies. or watching again the old Jimmy Stewart film Mr Smith goes to Washington and rooting for the corrupt old fat guys.

[Jack]

Pepe: on a smaller scale -- recent comparisons of the payback from college would have been distorted by good earnings in the whole construction sector including, along with actual "blue collar" tradesmen, typically, non-college R/E agents and brokers, mortgage originators/brokers, bnkers and even car/truck salesmen.

The construction sector has been halved and will be a long time "coming back" if ever.

Becker comes to a much better conclusion than Posner this week:

"So my conclusion is that America will benefit greatly from increasing the numbers of young men and women who go to and graduate from colleges and universities. To do that, however, will require improving the preparation received at K-12 levels, including the education at the very earliest school levels for young children poorly prepared for school. The challenges are enormous, but the potential gains are worth considerable effort from public and private bodies."

Posner suggests little need for public expenditures to make this happen. Interesting. With soaring college costs in an era of dire economic straits for many, what does supply and demand tell us about the numbers buying a product at a price point above that which is affordable to many, perhaps most prospective customers?

Counter to the "too many going to college" "problem" let's turn it around and ask about "too many NOT going to college."

[Bargain Outlet]

I don't really agree but that just my opinion...
Bargain Outlet

[GHD Hair Straighteners]

I have reason to doubt that it will or, if it does for a time, other forces will supplant it. One reason for my pessimism is the authoritarian nature of the regime that has just exited the stage.

[chi flat iron]

"So my conclusion is that America will benefit greatly from increasing the numbers of young men and women who go to and graduate from colleges and universities. To do that, however, will require improving the preparation received at K-12 levels, including the education at the very earliest school levels for young children poorly prepared for school. The challenges are enormous, but the potential gains are worth considerable effort from public and private bodies."

[Jack]

Liberal arts help provide a look into our humanity
Steve Haycox

Thoughts of a good Anchorage history Prof on our topic:

Published: March 18th, 2011

In a statement of desperation last week, the president of the University of Nevada Las Vegas, Dr. Neal Smatresk, responding to budget cuts proposed for his university by the Nevada legislature, cuts necessitated by financial crisis, announced that if the reductions go through, he will eliminate the university's philosophy department, along with some popular high-profile programs, including women's studies. Aside from the superficial observation that if any place needs classes in philosophy, which includes ethics, it must surely be Las Vegas, Smatresk's pronouncement stands as a disappointing commentary on contemporary higher education.

There are many, mostly outside the academy but also some few within, who will applaud Smatresk's plan. There has always been a strain of anti-intellectualism in American life because of the pragmatic nature of a well- realized democracy: Egalitarianism eschews elitism. Today it is taking the form of a particularly nasty know-nothingism that will likely pass away soon enough. At the same time there is significant pressure on university administrators to adopt a corporate mode of management with a heavy emphasis on outcomes assessment, as if the aim of the institution were to produce an impersonal product that can be marketed so as to show a handsome profit. Smatresk seems to be a captive of this model.

Both of these critiques are far wide of the mark. The contemporary university, particularly the state schools, has probably done more to break down hierarchy and elitism in American culture in the past 50 years than any other institution. A visit to any campus will confirm this. There one will find remarkable ethnic diversity, an effective challenge to the pernicious maldistribution of income and material well-being in the broader society, and a startling gender imbalance: Women predominate in American higher education today as nowhere else. This did not happen by accident but rather is the result of dedicated work in affirmative action, disabilities sensitivity and financial needs support. It's also been generated by assiduous course work in the history of prejudice and inequality, and the social and economic structure of American society, to which I will return momentarily.

Generally, outcomes assessment is a false paradigm for the university also. After the mastery of basic skills in writing, geography, history, mathematics and science, which ought to take place in secondary school but tragically too often does not, higher education was traditionally designed to be a platform for the autonomy of the individual. The corporate model of management, which emphasizes "cost effectiveness," will never fit well an institution that is supposed to nurture creativity across a wide range of potentials and personalities. Graduates are not replicative products, the marketing of which is supposed to generate profit for the organization.

Most faculty and administrators in the university recognize the desirability of liberal arts exposure for the institution's students. There is really no substitute for learning what the best minds of the past have thought, and for participating in the conversation humankind has been engaged in for centuries about what it means to be human and how to make choices that build character, refine judgment and enhance human effectiveness. Certainly this has been the story at UAA, where Chancellors Edward Lee Gorsuch, Elaine Maimon and Fran Ulmer each nurtured the humanities platform of the institution, enthusiastically supported by President Mark Hamilton. As dean of the business school, incoming Chancellor Tom Case was an aggressive advocate of a strong liberal arts foundation for his students. But as UNLV's Dr. Smatresk's intentions suggest, the stress on university administrators to direct resources to "practical" curricula is enormous.

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In a recent commentary on the modern university, "Not for Profit: Why Democracy Needs the Humanities," Martha C. Nussbaum argues that the marginalizing of the liberal arts by technocratic and business-oriented demands is counterproductive. It diminishes the university's capability to continue its work of redressing the inequalities and injustices of American society. For it's in the liberal arts courses that the most fundamental aspects of the individual and society are addressed: love, justice, fairness, decency, wisdom.

In another important commentary, "The Core: Teaching Your Child the Foundations of Classical Education," Leigh Bortins writes that students who have confronted these issues in liberal arts courses learn to make better decisions. Dr. Smatresk should probably read these books.

Steve Haycox is a professor of history at the University of Alaska Anchorage.

Read more: http://www.adn.com/2011/03/18/1763760/liberal-arts-help-provide-a-look.html#ixzz1H5ueIyxU

[Business Directory]

I would have to disagree with Professor Becker on his conclusion that America will benefit from even greater number of men and women attending and graduating from college. The overall tendency in the developed World is for a decrease in the number of those who work blue collar jobs as well as those work in agriculture and live outside metropolitan areas. This trend has been positive in the twentieth century enabling cities to grow and high technologies to develop. However, today the opposite is true. Lack of workers in agriculture and trades is a threat to our economy and business. Because so many Americans want to get a college degree as means to a "better life", the deficit of blue collar workers as well as their pay will increase and those who have considered a college degree will realize its value added is marginal or none at all.

[Jack]

Business D?? A VERY puzzling claim, and especially so as our construction sector has been halved.

Estimates today are that the "new economy" requires 75% college or technically trained. We graduate about 25% from college leaving a substantial gap which both Posner and Becker mention.

Admittedly, "blues" are suffering as well. When unions were stronger a high percentage of carpenters and others came in through apprenticeship programs as is still, often the case, for licensed plumbers and electricians.

The productivity of our nation is significantly reduced by NOT investing in apprenticeship programs as poorly skilled workers are hired when the economy wants to "boom" but are out there flopping around, getting in the way, dragging down productivity per person, getting hurt more frequently and ADDING costs to Workmens's Comp and to our "H/C" system.

If you believe in markets, there are two reasons we're unlikely to experience such a shortage of "blues" that wage increases would be a "problem".

One is that (unlike Europe and many other nations) the majority of the cost of college education is born by the individual and makes what economists call "a high barrier to entry". Indeed, $100k plus while trying to maintain existence for four or more years.

In purely economic terms the individual would have to believe such an expenditure worthwhile. Obviously there are other factors, such as the curious wanting to solve scientific problems, or that a teacher or administrator would, for the same pay, rather be warm and dry inside the building than outside framing or roofing it on a cold blustery, or scorching day. Also, we know well that it's TOUGH to engage in the trades at 50 plus, and age when attorneys or professors may be doing their best work at the highest pay of their careers.

The second reason? Quite a few folks learned something about the "blue" trades in their youth so, were pay and overall benefits in the trades to surpass pay for "college" jobs there would be some who'd change jobs, thus providing the ever elusive "economic equilibrium".

And something to consider in the real world of 18% under or unemployed? Suppose there were programs that would draw a third or so of them off the unemployment/welfare/food stamp rolls and into college or vocational training/apprenticeship programs so that when (if) the economy revives (in the predicted/hoped 5 years) we'll have an inventory of better trained, more productive people to power the next productivity gains. Gains one would HOPE will "trickle down" to both college trained and blue collar workers instead of being usurped by the top 1%.

[air jordans]

At some point it all becomes an embarrassment to the professional status of those economists who tell us that Krugman is a good economists .

[Pepe Fanjul]

as the mastery of basic skills in writing, geography, history, mathematics and science, which ought to take place in secondary school but tragically too often does not, higher education was traditionally designed to be a platform for the autonomy of the individual.