Yesterday the American Moustache Institute announced plans for the “Million Moustache March,” the objective of which is to encourage men to grow moustaches. It’s all about economics, they say.
According to AMI research, mustached Americans earn 4.3 percent more money than “clean-shaven Americans” on average per year. Therefore incentivising mustache growth would boost the economy.
It was a slow news day and this one got some play. Of course, the idea that you can grow the economy by growing a moustache is silly. And while the correlation between moustaches and earning power may well be genuine, it’s more likely coincidence than causality. No reasonable person really believes that not shaving will get them a 4% raise, or a job that pays more.
But over the last seventy years, the U.S. government has pushed the same silly idea, and the education industry has taken that argument and turned it into an insanely successful marketing ploy.
It’s a deceit that’s bad for those taken in by it and bad for America.
Here’s the basic argument: People with higher degrees have higher earnings and lower unemployment than those without degrees. The graphic below, complete with 20 point header, comes directly from a U.S. government website.
It’s a fabulous marketing campaign. Unfortunately it’s lead to some disastrous results. And it’s not exactly true.
How We Got Here
Until WWII, it was not particularly easy to go to college. In 1939, 186,500 people graduated from college with bachelor’s degrees. In 1949-50, that number had doubled to 432,558. While part of that was due to population growth, more of it was due to the G.I. Bill, which made college affordable for thousands of people for whom it would not have been affordable before. For politicians, the G.I. Bill served multiple purposes: It recognized and rewarded servicemen for their contribution while avoiding the challenge of instantly conjuring up hundreds of thousands of peacetime jobs. In effect, it used college as a holding bin so it could drip feed discharged soldiers back into the workforce.
The number of graduates stayed relatively stable until the early sixties. In the sixties, the number of people with bachelor’s degrees effectively doubled again. Again it was less about population increases than it was about a government program that made college more affordable to more people. In 1965, congress passed HEA, the forerunner of what are now Pell Grants. In this case, the objectives were more focused. The idea was to help poor and lower middle income students who might otherwise not have access to higher education get degrees so that they could earn more and move up. In short, it took the graphic above and created a program to turn it into reality for poor kids. It worked.
Over the last forty years, the government has continued to introduce more and more programs to help people go to college. And the relationship illustrated in the graphic between educational attainment and income became further cemented as employers began requiring degrees for even the most basic jobs.
Unfortunately, as in the case with most things that work, from banking deregulation to Fannie Mae, the problem with successful programs that work is they get extended to the point where they don’t work any more.
The Hole in the Argument
In the fifties, the relationship illustrated in the graphic was certainly true: More education, more income. Or more income, more education. It was probably a mix of both. Until education became widely accessible with the help of the government, only the rich and the very smart got degrees. Being real, real smart and starting out rich certainly gives you a leg up when it comes to earning more than the Average Joe.
But does it hold now? Probably to a degree, but not to the degree illustrated by the chart, and even more importantly: It’s not likely to hold in the future for three reasons.
- The first is: Not all graduates are created equal. As more and more people go to college, the talent pool is watered down, and people of less talent have degrees. While average people with superior education may well be better employees than average people without education, the question is “How much better?” Likely not as much as is shown in the graph.
- The second is: Not all degrees are created equal. A typical engineer makes $75,500 per year, and a social worker $43,180. Graduate more social workers and fewer engineers and that advantage begins to evaporate, and that’s exactly what’s happening. In 1966, 35% of all degrees granted were science and engineering. In 2008, that was 31%.
In truth, although this is just anecdotal, it’s probably worse than that as degrees-for-dummies programs and degrees proliferate and universities teaching junk science and history proliferate.
- The third is that the cost of getting that degree has risen tremendously. According to the Delta Project, college tuitions have increased over 300% since 1988, and that’s accounting for inflation. Other costs associated with college, including housing, food, and books, have also jumped. In overly simplistic terms, that means that it will take a social worker twenty years to pay off the cost of that investment in education.
But, my academic friends will howl, that ignores the intrinsic value of education, which is priceless, blah, blah. That’s fair. Tedious, but fair. There is an intrinsic value to knowing stuff. The issue here is truth in advertising. If my hypothetical social worker wants to go into twenty years of hock to take a course in Opera Appreciation, then I am all for it. Just don’t promise him it’s a can’t miss investment opportunity. Because a course in Opera Appreciation probably doesn’t pay in economic terms.
So What’s the Problem?
This over-marketing of education has led to some very bad results. There’s the debt mountain incurred by young graduates who have been gouged by avaricious universities. There’s a glut of advanced degrees, which has led to increased used of cheaper adjuncts to teach courses. There’s an overall devaluation of degrees as they become less exclusive.
And it has turned universities from educational institutions into untaxed profiteers. Indiana University is now the largest employer in the state of Indiana. And like many other universities, it’s had to get creative to find places to stash all that cash. Yes, it’s taken the same route as fat and happy corporations and expanded into adjacent industries, like research-for-hire and healthcare. It’s spent a fortune on its athletics teams—the typical Big Ten team spends $115,000 per athlete on coach’s salaries, etc. That’s seven times what is spent on a non-athlete student. And it’s built every building it can think of, and has still got a mountain of cash left over. IU has an endowment of over a billion dollars, like 28 other universities and colleges in the U.S.
Even worse, in the heady rush of being head of a major conglomerate and de facto owner of a valuable sports franchise, its leadership has arguably lost focus on what it is supposed to be doing in the first place. In a recent article in the Herald Times, IU president Michael McRobbie boasted that IU was spectacular for the state of Indiana, generating $25 of economic activity for every dollar of state investment, “That’s the kind of return investors could only dream of achieving in the stock market.” Forget for a moment that the comparison is gibberish in financial terms and ask yourself, “Really? That’s the measure of success for a university? Economic return?”
Anyway, of course the returns are great. Just like the bankers who profited from the government underwriting the housing market, so have universities profited from the government underwriting the education market. In fact, over the last twenty years we’ve seen a huge expansion of for-profit education, attracted by the potential for return. Indeed, not-for-profit universities have had it even better, because they face few competitive pressures on pricing (allowing them to gouge) and don’t pay taxes.
What’s the Solution?
It’s time for federal government to step back from the education loan business. Government loan programs have brought millions of lower income people into the middle class. They have primed the pump. Well done. Now it’s time to cut back loan programs–not eliminate them, but focus them on the best and the brightest lower income kids. Just like the government needs to get out of the housing loan market (or at least reduce its role,) it needs to get out of the education loan market.
There will be pain involved. Fewer kids will go to college. The number of colleges and universities will shrink. Heaven forbid, but without subsidies from other areas, football coaches may have to eke by on $2 million salaries and fly commercial. Colleges will be forced to become more efficient rather than just ratcheting up tuition to cover expenses. Employers will be forced to actually interview applicants rather than using bots to sort resumes. Some kids who never should have gone to college in the first place won’t get to go, and a few who should have, sadly will miss out.
But there will be a good result as well. Fewer kids will graduate with unusable sports marketing or fine arts degrees and $150K worth of debt. Colleges will become more focused and efficient. Admissions counselors will be able to show that graphic above to prospective students and know that they are selling truth, not bunkum.
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Your provocative piece leads me to ponder, what would happen if the advice offered was translated into policy?
The first assumption you make is that, absent the Federal government as primary provider of loans to the middle-class, colleges will rein in their costs of tuition. Sadly, I don’t see that as an automatic outcome. With the DOE out of the loan business what you would have are private sources of funding growing in their place. Plus, because they now would have no effective compeittion from the DOE they would be free to charge whatever interest rate the market would bear. This would, for middle-class families then solely dependent on such private lenders to supplement inadequate savings for their offspring’s college tuition, not represent any improvement over the current environment. It was barely six months ago that the DOE finally got private lenders out of the loan provision business – in theory this would, over time, reduce the marginal cost of student loans by cutting out the middle man. By a lot. Now, with the proposed fix-it-all of eliminating Federal loans for student education, for all except the poor, you woulld create an incentive for an even more rapacious loan industry. One going after somewhat deeper pockets.
I have no contest with these central theses, that:
– Tuition costs are too high, and have risen to absurd levels as a result of perverse incentives;
– The value of many degrees earned has fallen, and that many degree offerings are ill-suited to society’s needs – which is to the student’s detriment and society’s
– No question that the assumed value of an education, or any education has been significantly over-marketed.
What is also quite clear to me is that the solution offered provides no guarantee of meeting the stated goal.
What might do that would be if the government got out of the business of making loans, instead providing direct subsidy of college education at a level commesurate with current costs.
In other words, make college free. Enrollment largely based on merit and need. Provisions for affirmative action still in force.
True, that would not immediately reduce the cost of college per capita, but it would put the DOE in a forceful bargaining position – one they have heretofore been distanced from by acting as backer of loans or direct lender to students and their families. Over time, effective policy could be instituted that preserved funding, or enhanced the same for insitutions that exhibit an inclination to implement effective cost-curtailment on tuition and fees. Furthermore, it allows DOE to promote directly the type of educational offerings deemed most apt at meeting our larger needs – by direct programmatic allocation. This last also addresses another agreed concern – that the field of study have value in the job marketplace.
In case you wonder about the costs involved in all of this might be, back in 2010 Leopold postulated between $50 and $100 billion per per year. Which, compared to the curent uncontrolled fiasco could be money well spent, or at least, better spent.
http://www.huffingtonpost.com/les-leopold/stop-student-loan-sharkin_b_505460.html
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Keith
Nice comment, thanks. An opportunity for this sort of dialogue on issues that are bothering me is why I blog in the first place.
Yes, I think the cost of loans would go up and the availabilty would go down. However, rather than people getting hosed by loan companies, I think the result of that would be fewer people taking out smaller loans, and probably a shift to cheaper educational alternatives, like community colleges for the first two years, or public vs. private, or local vs. out-of-state, etc. Over time, four year colleges would cut price to compete.
Right now parents over-spend tremendously on undergraduate education, funding in many cases not education but a four year social experience. (Believe me on this.) They might be less willing to do so were the costs more obviously outrageous and if they did not have the fig leaf that they are not wasting money but making an investement with a guaranteed return. Taking the government’s endorsement out of it would expose it as the risky play it is.
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I was one of the lucky ones. My parents paid my tuition, and i worked throughout university to cover the rest. So i got a worthless degree that i was deeply interested in, but would never (outside of becoming a professor) land me a job. And that was fine. I wanted an education, not vocational training.
That the whole system as it currently operates is a massive scam is clear. Which debt can’t you discharge via bankruptcy? Why, that federal student loan debt. I’ll bet the good times purchased with an overage check at the beginning of a semester don’t feel so good when you’re still paying for it 25 years later.
I think that higher education and the idea of making money from going through it should be decoupled. Mostly because it’s clear that for most people it doesn’t hold true when the motivation for the education is as some sort of investment. Many, if not most, young people would probably do better with some sort of vocational training. I like the university education i got, but i’d be lying if i said that i wouldn’t be as happy today if i had just become a carpenter. …but here it gets troublesome because Americans feel like we should be defined by our career/job.
I like parts of Keith’s idea. I would work towards “free” higher education, but i would do so within a system where out of HS kids went to two years of what would amount to community college combined with national service. With the right educational component, many of them would probably come out of the two years with the education and skills they needed to be productive. Those two years of service would also be a ticket to further training or education on our collective dime.
If the government’s going to be in the higher ed biz, the least it can do is operate efficiently: give students value and society too.
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Let me begin by acknowledging that there is much about your analysis that I agree with. I’ve said any number of times that too many people go to college, people who are neither equipped for it nor psychologically built for it. And in many cases, what they want to do with their lives simply doesn’t require college. It requires a solid elementary and secondary education and maybe a bit of trade school, but most of that they need in terms of applied skills they can learn on the job better than they can in an academic environment.
The rub, of course, is that ” solid elementary and secondary education” thing, which sadly doesn’t really exist in the US anymore. At least, not for the vast majority of students. We fail at every grade level (we fail culturally even before kindergarten age, to be honest) and the result is that when you graduate from high school you DO need more education, even for the kinds of “non-college” careers I’m talking about above. You’re just not prepared for the world in any way, shape or form.
So MY solution to all this emphasizes things like early childhood reading programs, a step you can take that dramatically increases your effectiveness in every class you ever offer again at any level period amen. Do that right and you don’t have to waste so many hours from there on out in remedial mode and when kids graduate from high school they know what they need to know for many of the jobs they want to pursue.
I think what I’ve said so far accounts for a lot of what you have to say (and agrees with it, best I can tell). Now, to some of your specific arguments.
The second is: Not all degrees are created equal. A typical engineer makes $75,500 per year, and a social worker $43,180. Graduate more social workers and fewer engineers and that advantage begins to evaporate, and that’s exactly what’s happening. In 1966, 35% of all degrees granted were science and engineering. In 2008, that was 31%.
You’re asking me to assume something about the value of social work. And, I suspect, if I poke a little, I’m going to find that assumption expanded to cover much of what education today does. More specifically, I think (and I’m drawing on past conversations we have had offline) you’re asking me to exalt applied learning and denigrate programs that explore “pure” knowledge – that is, knowledge you can’t sell. Like the Humanities and some social sciences.
This is a typically American assumption that traces to our founding days. We’re the nation that developed the land grant phenomenon and that, emerging from a Puritan work ethic, tended to sneer at knowledge that wasn’t practical. Many of us today have encountered the dark side of this ideology in the form of people who dismissed the value of our “book learnin’.” Don’t know about you, but I know this is true for me, and the phenomenon interested me enough that I devoted a good bit of space to it in my dissertation.
In conclusion, consider me completely unwilling to buy the assumption in any shape or form. I absolutely value applied knowledge because the lack of it dooms me to living in a cave. We’re healthier and our overall standard of living is far higher than it could ever be in the absence of a commitment to applied sciences.
On the other hand, I have no interest in living in a society with no soul (or, to be more accurate, even less soul than we already have). Those non-applied arts often take us places that we, as enlightened animals, need to go if all our applied gifts are to be meaningful. I’d note that ethics, for instance, is the progeny of the pure Humanities, and if you want to imagine a terrible world think about one in which technology runs wild without the reflection that comes from Philosophy.
But, my academic friends will howl, that ignores the intrinsic value of education, which is priceless, blah, blah. That’s fair. Tedious, but fair. There is an intrinsic value to knowing stuff. The issue here is truth in advertising. If my hypothetical social worker wants to go into twenty years of hock to take a course in Opera Appreciation, then I am all for it. Just don’t promise him it’s a can’t miss investment opportunity. Because a course in Opera Appreciation probably doesn’t pay in economic terms.
I don’t honestly know whom you’re talking about. I’ve been a Liberal Arts student. I’ve known History majors and Social Work students and been a professor teaching English and Communications and even Creative Writing, and am familiar with all kinds of folks in the “fry cook” disciplines. And NONE of them think they’re involved in a can’t-miss investment opportunity.
So this is a compelling meme, but in my experience it doesn’t describe any actual people or situations.
And it has turned universities from educational institutions into untaxed profiteers. Indiana University is now the largest employer in the state of Indiana.
Let me take this at face value for a second (and grant you everything you say about the athletic program, where not only do I agree with you, I suspect I think you’re going too easy on them). I guess I’d note that here’s a system that provides a lot of jobs. And jobs with benefits. Jobs with benefits in an industry that promotes learning.
Beats the fuck out of the military as a jobs program, and I’ve worked in way to many corporations to glorify that as an alternative.
Now, we talked last week. As you know, I can carp for the rest of the day on all that universities are doing wrong. NCAA-worship is only one issue.
Even worse, in the heady rush of being head of a major conglomerate and de facto owner of a valuable sports franchise, its leadership has arguably lost focus on what it is supposed to be doing in the first place.
Yes. Yes yes yes yes yes. Yes.
Forget for a moment that the comparison is gibberish in financial terms and ask yourself, “Really? That’s the measure of success for a university? Economic return?”
If you recall, I noted that the corporatization of ed is bullshit, much like what we see in the healthcare sector. Our ed system is the suck, and all the places around the world that kick our asses have decidedly public educational systems. Which frees them from thinking about ROI.
Now, overlay this with my comments above. Too many kids going to college, and all those other things wrong with the university, and high tuition? Right. A big reason why tuition is high is because we pay massive amounts to administrators who provide not a lick of value to the student “consumer.” People like recruiters. Well, why do we need massively paid recruiters? Ah. To attract students. Because we have too many colleges. Because it’s all privatized. And round and round we go.
If we “right-size” the number of kids going to college via fixing elementary and secondary structures, we go a long way toward getting some rationality and equilibrium into the system.
Also, that study our colleague Lex sent around a few days ago seems to bear out my suspicions – very little of the skyrocketing increases in tuition go to prof salaries. Most of it goes to things like admin salaries, “student services” and facilities, which in many cases have to do with recruiting. It’s like with sports conversations about a college’s facilities – athletes want nice gyms and practice facilities and weight rooms and regular students want a nice student center and premium food (not like the swill you and I had to live on back in the dark ages). Those costs are about “competition.”
It’s time for federal government to step back from the education loan business.
Well, I’d say get out of the loan business, and to what Keith suggests upthread, get into the business of funding advanced education 100% for students who qualify. I said this back in 2007: “Every dollar spent on education is an investment that generates tens to hundreds to thousands of dollars in returns…” This doesn’t hold where you’re wasting money, of course, and what I say here perhaps gives you some idea of what I mean by that. But in general, it’s a good idea to spend a dollar today when that dollar is guaranteed to return you thousands in 20 years.
In the end, I think I agree with you about a great deal. We can and should be doing better, but it’s a dramatic journey from where we are to where we need to be and there are lots of intractable monsters along the road….
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Well, color me nonplussed. If I were a tenured full prof at IU — with a billion bucks of endowment — I’d be sufficiently outraged to buy much of the argument about cost. (I agree with Sam’s take on the value of knowledge for knowledge’s sake mixed in with a goodly about of applied knowledge.)
But I’m a prof at a tuition-driven university with barely $50 million in endowment funds, I’d guess. I think more schools such as mine exist that IU and its large contemporaries.
And I’d suggest checking in on discount rates at various levels of universities. While colleges are certainly pricey, on average, few pay full freight. In fact, that’s a rarely discussed recruiting tactic: offer a healthy discount rate to freshmen, hook ‘em on your university, then sloooowly lower that discount for the next three (or six) years.
A great post, nonetheless. Glad I had a chance to read it.
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