(Editor’s note: This article was published in Investor’s Business Daily on August 24, 2011.)
You’ve undoubtedly heard the conventional wisdom: Going to college yields a high return on the investment, whatever its cost. Even if college is expensive, it will more than pay off in the end—or that’s what everyone says.
The College Board claims, for example, that someone who graduates from college with a bachelor’s degree can expect to earn about 66 percent more income over a 40-year working life than the typical high school graduate. The Lumina Foundation goes so far as to say that higher education is a prerequisite to success in today’s economy.
These estimates of high lifetime earnings levels make a common error: They assume that the current generation is going to get the same financial benefit from college that people did who graduated 40 years ago.
But things are different today. According to the Bureau of Labor Statistics, nearly 70 percent of all high school graduates go on to college—compared with 45 per cent in 1960. Then, only the brightest and best-prepared students attended college and the schools offered academically rigorous courses that prepared students for the future.
Now, even middling high-schoolers attend college—and often learn very little. Then they enter a job market where a bachelor’s degree is relatively common—and must compete against many others for the same jobs.
A recent example of this exaggerated view of the value of higher education is “The Undereducated American,” a paper by Anthony Carnevale and Stephen Rose of the Georgetown Center on Education and the Workforce.
The authors argue that the United States needs to produce far more college graduates than it currently does. Their evidence is that there is a significant wage “premium” for those who graduate from college—across all fields of work. They argue, in effect, that the high return on investment applies regardless of whether the graduate becomes a financier or a dishwasher.
But they fail to look at generational differences.
Recent data from the U.S. Census Bureau reveal that gains for recent college graduates have been declining for more than 10 years. In 1991, for example, young workers with bachelor’s degrees were earning on average 48 percent more than those with high school diplomas only. In 2001, recent college graduates’ earnings were 68 percent higher than those of high school grads. But then the difference started to decline and by 2009 recent college graduates were earning just 54 percent more than high school grads.
Analysts at the Center for Workforce Development at Rutgers University confirm this trend, reporting recently that the median starting salary for bachelor’s degree recipients in 2009 and 2010 was just $27,000, down from $30,000 in the years 2006 to 2008.
While earnings are down, college costs are up, with tuitions increasing nearly 300 percent since the mid-1980s. That significantly reduces the net gain that degree holders realize.
Student debt also has increased, rising from an average of $12,750 in 1996 to $24,000 in 2010, according to the Project on Student Debt. This is reflected in the student loan default rate, which has risen from 4.5 percent five years ago to 7 percent today.
In fact, many recent college graduates have not only found it difficult to get a good-paying job in their field, some have found it difficult to get any kind of meaningful job. A study by the National Association of Colleges and Employers, for example, found that less than a quarter of the 2010 college graduates who applied for jobs while still in school had jobs waiting after graduation.
The federally reported jobless rate for college graduates under age 25 is currently 8 percent. This, too, is significantly higher than the rate for college graduates overall, which stands at 4.9 percent.
We all realize that the country is in an extreme economic funk, from which it will eventually recover. But even when it does a bachelor’s degree will be no guarantee of future earnings.
Whether students should go to college is an important question worth serious examination. To arrive at an honest answer we need to stop comparing today’s students with the Baby Boomers. Times have changed.