The value of a college degree

Public conversation these days is filled with talk of the declining value of getting a college education. Don’t believe it! The earnings premium from a four year degree or more is greater today than ever and almost certainly will grow going forward.

Two terrific new articles make that case quite well. Both are worth reading. The first from Kevin Carey of Education Sector is entitled Bad Job Market: Why the Media Is Always Wrong About the Value of a College Degree. The second is from David Leonhardt of the New York Times. It is entitled Even for Cashiers, College Pays Off

Carey argues that the mainstream media has been writing the “college is not a good investment” story for four decades. And that it always has proven to be wrong. As Leonhardt writes the basic facts are:

… the returns from a degree have soared. Three decades ago, full-time workers with a bachelor’s degree made 40 percent more than those with only a high-school diploma. Last year, the gap reached 83 percent. College graduates, though hardly immune from the downturn, are also far less likely to be unemployed than non-graduates.

Why? Because the two mega forces that are fundamentally changing the economy – globalization and technology – are increasing the demand for high skilled workers even faster than the supply is growing.  As Carey writes:

Many jobs involving simple, repetitive tasks have been rendered obsolete by machines. Employers will pay people less money, or no money at all, to perform them. The jobs that remain, however, require increasingly sophisticated skills. A steel mill that once employed 20 low-skill laborers per unit of production may now employ one person manipulating complex equipment. Typists barely exist any more, but scientists can communicate with colleagues worldwide via email, download documents from archives instantaneously, and crunch gigabytes of data on cheap laptop computers. Economists call this “skill-biased technology change.” Under this scenario, more productive workers earn more, on average. And the workers who come to the labor market able to take advantage of complex technologies and manipulate flows of information are disproportionately college graduates. That’s why the labor market continues to pay a premium for degrees.

This, of course, is the core story Michigan Future has been telling for decades. Employment growth and high wage work are increasingly concentrated in the knowledge-based sectors of the American economy. Where the Carey and Leonhardt articles are particularly interesting is in going beyond that basic trend.

Carey tells the story of Sally Cameron who was featured in a 1982 Washington Post article because she was working as a bartender after having studied French and Arabic at “a tony liberal arts college”. Sound familiar? Fast forward nearly thirty years and Carey finds Cameron isn’t tending bar anymore. She’s a senior manager at an international development consulting company that works under contract with USAID. Her recent work includes building railroads in cyclone-devastated Madagascar. Her liberal arts degree from Smith College must come in handy, since one of the two official languages there is French. As Carey concludes: That’s how things usually work out for people who get college degrees.

Leonhardt further expands the case for the value of a college degree by citing a fascinating new study by Anthony Carnevale and Stephen Rose. They found 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.

The value of a college degree is far more than how quickly a graduate gets a first job and how much it pays. These are the short term metrics that fuel the “college isn’t worth it” nonsense. Rather the payoff is over an entire career. It comes from having skills that give you a competitive edge in all industries and most occupations, in having skills that may not be in demand today but will be in the future and in learning how to learn so that you can better spot new opportunities and take advantage of them in a constantly changing labor market. As we will explore further in an upcoming post, investing in a college degree is probably the single best investment anyone can make.

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