American higher education is not a totally optimal value-proposition, and I think it’s fairly clear that there’s a healthy dose of waste and inefficiency in the system driving tuition inflation. At the same time, I think it’s also fairly clear that one of the main reasons why college administrators have been able to get away with ever-rising tuition and spending a lot of money on things of dubious value (the burgeoning ranks of college administrators, say) is precisely because going to college remains a much better idea than not going to college. So I was glad to see David Leonhardt bring some much-needed pushback against the idea that going to college isn’t worth it in his Sunday column.
He notes, for example, that the college earnings premium is pretty clearly not just a selection effect: “Various natural experiments — like teenagers’ proximity to a campus, which affects whether they enroll — have shown that people do acquire skills in college.” With that in view, Peter Orszag’s slide about college and class stratification is absolutely crucial viewing:
What you see here is that across the board there clearly is a fair amount of pure selection going on. The smartest kids are most likely to go to college, so it’s no surprise that college graduates tend to go on to earn more money even if you’re not learning anything of value there. But per Leonhardt, it’s clear that on average, people actually do pick up skills in college, and per Orszag, it’s clear that among kids of roughly average intelligence, whether or not your parents are rich is a major determinant of whether or not you end up going to school and gaining those skills. This is a big problem. If middle-third kids from families in the bottom half of the income distribution went to college at the same rate as middle-third kids from the top quartile, they’d be better off and we’d have a much more skilled workplace.
People are sometimes dubious about this at the micro level because they wonder what kind of jobs it is people are doing that they “need” college degrees for. One of the more interesting things I learned from Poor Economics is that in developing countries, increased educational attainment boosts earnings even among near-subsistence peasant farmers who obviously in some sense don’t “need” schooling to do their jobs. Leonhardt reports on research indicating that this same mechanism seems to apply to the service economy of modern-day rich countries:
Another study being released this weekend — by Anthony Carnevale and Stephen J. Rose of Georgetown — breaks down the college premium by occupations and shows that college has big benefits even in many fields where a degree is not crucial.
Construction workers, police officers, plumbers, retail salespeople and secretaries, among others, make significantly more with a degree than without one. Why? Education helps people do higher-skilled work, get jobs with better-paying companies or open their own businesses.
Thinking about plumbers, I guess I would say that knowing how to fix pipes is one thing and knowing how to spot and take advantage of business opportunities is another thing. General skills in reading, math, communication, and analytical reasoning are going to help you ply your trade more effectively even if your trade doesn’t itself involve much in the way of reading, math, etc. Making it possible for people to gain more skills isn’t the be-all and end-all of sound economic policy, but it makes a very big difference especially over the longer-term as the ups and downs of the business cycle even out.