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Red Pen Edit: The New York Times Magazine on American Colleges
Things are not as bad as they seem
This week the New York Times Magazine published an article titled “Americans Are Losing Faith in the Value of College. Whose Fault Is That?” by Paul Tough. Tough has written several books about the education system, along with countless articles at an impressive array of outlets. He definitely knows education, so I was interested to see the answer to the question in the headline.
As always, I do need to put the bias disclosure here that I am a professor at a private university in the United States. My university is feeling the same financial pinch as many institutions of higher education. Paul Tough’s bias may also come into play. He attended Columbia and McGill, two of the best universities in the United States and Canada, respectively, but did not graduate from either. Since he is an extreme example of someone who has been incredibly successful in journalism without a college degree, that may color his thinking.
Ninety-six percent of parents who identified as Democrats said they expected their kids to attend college — only to be outdone by Republican parents, 99 percent of whom said they expected their kids to go to college.
This is an astonishing statistic. I knew the numbers would be high, but I did not know that having a college-educated child is an almost universal desire for parents in the United States, at least when this survey was done ten years ago.
Among young Americans in Generation Z, 45 percent say that a high school diploma is all you need today to “ensure financial security.” And in contrast to the college-focused parents of a decade ago, now almost half of American parents say they’d prefer that their children not enroll in a four-year college.
This is also an eye-popping pair of statistics, but also one that needs to be taken with a grain of salt. The idea that any degree, whether it be a high school diploma or PhD, will “ensure financial security” is completely misguided. Only a rigid caste system would ensure that a degree resulted in financial security. A good degree will put you in the position to achieve financial security, but it’s just the first step of many. Also, the poll regarding parents was done in April of 2021. I suspect there is a very large Covid effect and the results would not replicate today.
The numbers on campus have shifted as well. In the fall of 2010, there were more than 18 million undergraduates enrolled in colleges and universities across the United States. That figure has been falling ever since, dipping below 15.5 million undergrads in 2021.
This is cherry-picking dates to make a point seem more conclusive. Higher education enrollment is often counter-cyclical: colleges generally do better when the economy is poor, as students stay in school longer to avoid a bad job market. Fall 2010 was the worst job market in living memory, so college attendance was artificially high. The long-term trends over the last 20+ years are still positive:
On average, countries in the Organization for Economic Cooperation and Development have increased their college-degree attainment rate among young adults by more than 20 percentage points since 2000, and 11 of those countries now have better-educated labor forces than we do.
This is a concerning statistic. The US is historically one of the most educated countries in the world. If the gap between the US and other countries is merely closing because other nations are doing better and the US is staying level, good for them! Other countries surpassing the US is more concerning.
Tough next mentions that the college wage premium, or the difference that the typical American college graduate is paid compared to a high school graduate, is higher than ever. But if this is the case, why is the popularity of college decreasing? As Tough astutely says:
[The college wage premium] can tell you how much college graduates earn, but it doesn’t take into account how much they owe — or how much they spent on college in the first place.
This is a great point. The college wage premium has been looked at for decades, but is only part of the picture. Tough then describes a new measurement: the college wealth premium. The college wage premium looks at the difference between the incomes of college graduates and high school graduates, while the college wealth premium looks at the net wealth of college graduates compared to high school graduates. Thus, the college wealth premium will take into account the costs of attending college. Researchers have examined the college wealth premium, and found the following:
The wealth gap for college graduates is very high for those who were born in the 1940s, but has decreased significantly since.
But younger white college graduates — those born in the 1980s — had only a bit more wealth than white high school graduates born in the same decade, and that small advantage was projected to remain small throughout their lives.
I did not read the entire Fed article that underpins the above graph, but I have a few quibbles. First, at least for white graduates, the wealth premium is still positive. So a college education is still financially worthwhile. Second, I suspect that there are calculation issues behind the falling wealth premium. The costs of a college education are 100% frontloaded; one has to pay the costs of attending college entirely upfront, either directly or by taking out loans. The benefits, however, are distributed for the rest of a person’s life. So those born in the 1980s have paid 100 percent of the costs of a college education but have not even recouped 50 percent of the benefits.
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The authors of the Fed study state “To be clear, these estimates take into account the fact that the older cohorts have had more time to accumulate wealth than the younger cohorts. Our models explicitly adjust for age by including a flexible life cycle component in each specification. Our estimates of wealth premiums are conditional on the amount of wealth accumulation we would expect at any given age.” But they do not go into detail. How was this calculated? I believe that it is likely that the wage premium for college graduates will grow at a different rate for those born in the 1980s than those born in the 1950s, especially given that the top one percent of the income distribution is earning proportionally more. I’d love to know how the future earnings and debt of those born in the 1980s were projected.
But since 1992, the sticker price has almost doubled for four-year private colleges and more than doubled for four-year public colleges, even after adjusting for inflation.
This is a meaningless fact. It is impossible to pay the sticker price at many four-year private colleges. Almost all colleges have gone to the “always on sale” model of pricing. A very high sticker price is chosen and then every student is offered a substantial scholarship. Comparisons between the sticker prices of colleges in 1992 and 2023 are useless.
After financial aid, the average net price for private-college students is about $33,000 a year; at public institutions, it is about $19,000.
That’s better. The above numbers include living expenses. And honestly, this doesn’t strike me as that bad. An average net price for a degree from a public college is $76,000, but that includes housing and other necessities, seems reasonable to me. I’d also like to see the median amounts, as the averages are likely distorted by high outliers (I wrote about the differences between median and averages/means here).
Tough next talks about the outcome disparities of different college students by comparing enrolling in a college to gambling at a casino:
For whom does college pay off, and for whom does it not? He analyzed the data by college major, by academic ability and by tuition costs, and was able to show in more detail exactly who was winning at the higher education casino and who was losing.
The results aren’t surprising. According to another economist, those who are on full scholarship and graduate are almost certain to out-earn those who only graduate from high school. But what about students who might not graduate?
If you’re paying $25,000 a year in tuition and expenses, Webber calculated, your chance of coming out ahead drops to about 2 in 3. At $50,000 a year in college costs, your odds are no better than a coin flip: Maybe you’ll wind up with more than the typical high school grad, but you’re just as likely to wind up with less.
The underlying source provides this graphic:
The graph accounts for both the cost of college education and the fact that a large percentage of students who start college do not finish. This is useful information, but the casino analogy is a poor one. Students don’t graduate or drop out by chance. Those that are smarter and/or work harder are far more likely to graduate. In an abstract sense, it is useful to know a hypothetical student attending the most expensive private schools might not wind up financially better off. For any particular student, however, it doesn’t convey a lot of information. For those that do graduate, a positive payoff is still likely. Even those at the most expensive schools have an 80 percent chance of college paying off as long as they graduate. The lesson is clear and obvious: attending college and not graduating is a bad idea. But that shouldn’t be news; paying tens of thousands for a service and then not using that service is always a bad idea.
It’s also important to note that this only incorporates income. College-educated graduates also work jobs that have, on average, better benefits. Especially when considering the cost of healthcare, this needs to be included in any calculation of whether college is worthwhile. Beyond benefits, the type of work a prospective student wants to do is crucial. Some sectors require college degrees to get in the door. It always frustrates me that workers unarguably care about job aspects other than pay, but those characteristics are ignored in articles like this one.
Tough then returns to polling:
In an ongoing Pew survey, the portion of Republicans (and those who lean Republican) saying colleges and universities had a negative effect on the country rose to 58 percent from 37 percent in just two years, between 2015 and 2017, while the responses of Democrats (and those who lean Democrat) held steady.
This is eye-catching but I don’t think can possibly be an accurate representation of reality. An alternate way of asking this question would be, “Do you think the country would be better off if every college and university closed, and the highest degree available was a high school diploma?” I think the answer would be far, far lower. Instead, respondents are probably answering some variant of “Do you think colleges and universities have gotten worse?” rather than the question being asked.
After the Great Recession, state governments cut their funding for public colleges, and the colleges responded by raising tuition and cutting spending on instruction and student services.
I’d like to see a source on this. I buy that per-student instruction spending has decreased, but student services have exploded, as many schools now have apartment-style housing, spa-like gyms, and puppies on campus to relieve stress (ok, I might be fine with that last one).
The college casino, in other words, is not entirely a game of chance. Your odds of coming out ahead depend largely on who your parents are.
This is both depressing and untrue. There are absolutely advantages to being raised in a wealthy area and in a community where education is valued, especially for those seeking entry to an elite private school. But, contrary to what almost every writer at the New York Times seems to think, the vast majority of students are not going to elite private schools. More importantly, attending an elite private school is neither necessary nor sufficient to be financially successful. As a professor at a non-elite school with a student body that runs the financial gamut, the biggest factor isn’t who your parents are, it’s who you are. A good social background only takes you so far. Those with a strong work ethic tend to do well, those without do not.
Addendum: I generally don’t like to dunk on stupid statements in the comments section, but this was the most recommended comment on the New York Times website when I wrote this article, and I can’t let it go:
When I see the wealth amassed by my friend who owns a roofing company, and another who is a pilot working just 3 days a week. I get it. I have a PhD and teach at a university and make far less. The football coach, though? Millions a year. Education is simply not valued in this country.
What elitism and lack of basic economic sense. First, someone who owns a roofing company should make more than someone who teaches at a university. Roofing is physically challenging and dangerous. Owning a successful roofing company is the result of years, if not decades, of hard work. Pilots may only have a bachelor’s degree, but the amount of non-degree training is very high. It takes a lot of work to be a pilot for a commercial airline. The result? There hasn’t been a commercial airline crash in over fourteen years!
It is frustrating to many academics, myself included, that football and men’s basketball coaches make millions while adjunct instructors make thousands. But that’s the way supply and demand works. Although the highest-paid public employee is a football or men’s basketball coach in most states, the average salary for a college coach is low. For every Alabama football head coach there are countless assistant coaches, coordinators, and graduate assistants who are making middle-class wages. Top coaches also bring in tens of millions of dollars through donations, television deals, etc.
Education is highly valued in the United States. Otherwise there wouldn’t be over a trillion dollars in college debt! At the same time, expecting to have money showered on you because you have a PhD is ridiculous. People will pay those who provide them with goods or services and who have skills in short supply. The result is that many a plumber earns more than the typical university instructor. And that’s the way it should be.