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College Doesn't Pay for Everyone

Friday, 25 April 2014 05:09

In her Washington Post column Catherine Rampell correctly pointed out that the median return in higher wages for those with college degrees more than covers the tuition and opportunity cost associated with attending college. She notes however that college enrollment has edged downward in recent years.

While she sees this decline largely as the result of young people failing to recognize the benefits of college, it can be more readily explained by a growing divergence in the income of college grads. Work by my colleague John Schmitt and Heather Boushey shows that a substantial proportion of college grads, especially male college grads, earn less than the average high school grad. They found that the lowest earning quintile of recent college grads (ages 25-34) earned less than the average high school grad. The implication is that many young people may be reasonably assessing their risks of not being a winner among college grads and therefore opting not to get additional education. To get more young people to attend college it is important that most can predictably benefit from the additional education, not just that the average pay of college grads rises. (of course the story would be worse for those who start college and do not finish.)

Note: typos were corrected and the comparison was clarified.

Comments (15)Add Comment
written by Last Mover, April 25, 2014 6:09

Exactly. For example in the western states picking cotton by hand is making a comeback for many who discovered the present value of manual labor beats a college degree any day.
written by s ken brown, April 25, 2014 6:37
Nursing and Engineering are the only disciplines where an undergraduate degree yields instant middle class pay. Entry level is generally $60k and there is a constant dearth.
Unemployable graduates.
written by Ralph Musgrave, April 25, 2014 6:55

Kids who go to university tend to be from stable or middle class backgrounds, and they tend to earn more even when they DON’T GO to university. It is thus useless to compare the earnings of graduates to non-graduates unless one controls for family background. I did a word search of the “Hamilton Project” study cited in that WP article, and I found no indication that family background had been controlled for.

But never mind. Studies like the Hamilton one keep unemployable graduates busy, and they give the WP something to witter on about – or am I being too cynical?
written by LSTB, April 25, 2014 6:57
It is incredible that Rampell can defend college education by simultaneously saying that college grads' unemployment is down and many grads work in jobs that don't require a college degree. It's called signaling. Look it up.
written by JSeydl, April 25, 2014 7:23
She's cites the median pay, not the average, no?
written by VicJane, April 25, 2014 7:26
I wonder if the non-attending have also figured out that any increase in lifetime wages will be snatched by the college-loan profiteers?pprl
The column had links leading to an old Robert Samuelson column from 2012
written by John Wright, April 25, 2014 8:57
Robert Samuelson is frequently justifiably criticised at this site, but he did have a column about the college-for-all crusade on May 27, 2012.


To give more credit to Samuelson, he wrote this column in 2012, when BOTH his direct employer (WaPO) and the for-profit online Kaplan University were both owned by Graham Holdings Company.

Samuelson writes: "The college-for-all crusade has outlived its usefulness".

And for those who suggest engineering is the degree to get, one can go to bls.gov and look up the job outlook for various engineering jobs.

Here is the estimated job outlook for various engineers over the 2012-2022 range.

Note, the percentages are the projected change in employment from 2012 to 2022, NOT the yearly growth rate.

The average growth rate for all occupations is 11%.

All of these percentages are classified as "slower than average", as the BLS believes there will be in the range of 4% to 7% more people employed doing these types of engineering in 2022 vs 2012.

Electrical/Electronics Engineers, 4%
Computer and Hardware Engineers, 7%
Chemical Engineers 4%
Mechanical Engineers 5%
Aerospace Engineers 7%

There is one "faster than average" engineering specialty that I saw in my search, Civil engineers at 20%.

This represents about 54000 incremental civil engineering jobs by 2022 for a country of 300+ million, spread over 10 years, this averages about 5400/year.

Colleges have seemed to price up their product to capture more of the perceived/advertised value, seemingly to create a class of educated and desperate workers for American employers.

written by PeonInChief, April 25, 2014 11:50
It should be obvious that class matters. Young people who go to elite universities often have the social connections that make getting a good job easier (or in the present period, possible). Young people who go to non-elite universities often make little more money than high school graduates. And young people who don't come from wealthy families get the double whammy--even if they go to non-elite universities--of limited job opportunities and lots of debt. (I wonder if some parents didn't think that refinancing the house in '06 to acquire the money for their children's college expenses wasn't a good idea, even if they lost the house to foreclosure. The kids would have been saved from a bunch of debt.)

But I'm still one of those crazy, lunatic radicals who think that more education is good in and of itself, and that it should be cheap and easy for all children, no matter their background.
It's all about the major!
written by Sam, April 25, 2014 11:58
Yes, it is all about your major! Isn't that the unsaid obvious? If you get a nursing degree at all almost any college, you'll be able to go out and get a high paying job. If you major in English or history at almost any college, including Harvard or Yale, your job prospects are bleak. Garrison Keillor's sketch on Prairie Home Companion about the English major working at a fast food 'cheese' place was dead on. Ask around at Starbucks and see how many are under employed college graduates! Sadly, the moral is don't borrow money to get a liberal arts major, but yes, it may make sense in a field with real jobs. Of course, the market is moving--a computer degree is no longer a guaranteed ticket. It's a jungle out there, as they say.
written by huh, April 25, 2014 3:24
my neighbor is a truck driver and pulls $90-100k per year. My plumber made over a $100k last year. These are jobs that can't be outsourced to another country, I notice.
written by Larry Signor, April 25, 2014 7:42
You may be correct. Young to middle age workers are increasing their education by obtaining certificates and licensees for highly skilled manual labor jobs which can pay very well. This highlights your point http://www.bls.gov/ooh/install...orkers.htm perhaps we need a re-evaluation of the marginal value of different types of education.
Two things
written by jhaskell, April 25, 2014 8:39
First, while Rampell disaggregates college degrees, there needs to be further parsing of the date between those with just a 4 year degree, and those with a 4 year degree plus a masters/phd/etc. As Jonathan James at the Cleveland Fed noted, the college wage premium is more of a college/grad school wage premium.


Also, as noted in a comment above, not a graduates hold positions that require their degree, so their earnings are in actuality independent of their degree.

Second, the college wage premium is driven much more by a decline in earnings of non-4 year degree holders than an increase in earnings of 4 year degree holders.


While there is still (generally speaking) a financial advantage to a 4 year degree over not, with rising student debt that advantage (return on investment) is shrinking.
You are all overlooking the fact that . .
written by aj oliver, April 25, 2014 8:50
going to college makes one a better person. And a liberal arts education can give one a basic "bullshit detector" that comes in mighty handy when up against the depredations of 21st century capitalism. States and counties with higher educational attainment have higher qualities of life. That is no accident.
written by Kat, April 26, 2014 6:14
Since there is really no segment of the labor market that is tight, I am not sure how picking your major wisely will protect you.
As for college providing you with a BS detector, it seems that much of this BS is created by those with a college degree, or even emanates from the academy itself. I would hope that citizens would not need a college degree to be equipped with a BS detector. Or better yet-- less BS!. I don't see this happening in the age of school reform.
written by Ron Alley, April 26, 2014 6:25
Great comment. I appreciate the links and insight.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.