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If you’ve been watching the NCAA Tournament, chances are you’ve seen a few Enterprise Rent-a-Car commercials. They always feature young, attractive former college athletes who’ve traded in their jerseys for suits with Enterprise nametags. The truth is, Enterprise’s interest in recent college graduates goes far beyond athletes: the firm prefers to hire folks who have finished college for its entry-level management trainee positions. When you walk into an Enterprise, odds are the young man or woman helping you behind the counter has a bachelor’s degree.
Many conservatives hear this and wonder why somebody would waste lots of time and money to go to college only to wind up giving out keys at the rental car counter. As economist and Forbes columnist Richard Vedder has routinely argued, a large proportion of recent college graduates are working jobs that don’t require a college degree. A similar talking point became a campaign issue in 2012, when Rick Santorum labeled President Obama a “snob” for calling on Americans to get one year of postsecondary education.
The message: too many people are going to college. These critics are almost certainly right about one thing; many students would be better served by alternatives like learning a trade or signing up for an apprenticeship.
But these criticisms are tone deaf when it comes to the anxieties of middle and lower-income families. While conservatives see Enterprise as evidence that college isn’t worth it, today’s families see a terrifying proposition: “My kid won’t even be able to work at a rental car counter if they don’t go to college.”
What these families need is a credible alternative to an expensive college degree, not a lecture about how their kid shouldn’t go to college.
This, my friends, is the college conundrum, and it is kicking families in the teeth. It has three parts.
1. We’re paying more.
College costs have always risen faster than inflation, but the last decade or so has been relentless. Between 2003 and 2013, the sticker price of attendance at a private non-profit college increased 24 percent after adjusting for inflation; at public four-year schools, traditionally the less expensive option, the increase was 37 percent. It’s true that net prices—what families pay after accounting for grants and scholarships—have not grown as fast, but even these out-of-pocket costs are now increasing more quickly than sticker prices.
Family incomes have not kept pace. Since 2000, the median household income has fallen 6.6 percent, and 35 states recorded significant drops in income over that same period.
2. We’re getting less.
Rising costs might be worth it if the return to a college degree were growing at a similar rate. It isn’t. According to Census data, over the decade from 2002 to 2012, mean earnings for men between the ages of 25 and 34 with a bachelor’s degree fell by more than $4,000 after adjusting for inflation—a decline of about 7 percent.
This wage stagnation is partly due to the fact that lots of recent college graduates are underemployed. A January study from the New York Fed found that 44 percent of recent grads were working jobs that did not require a college degree in 2012, and an increasingly large proportion of them were employed in low-wage jobs. Even more troubling: these trends have been underway since the beginning of the millennium.
3. But some kind of education after high school is more important than ever before.
Say what? How could all three of these things be true at the same time?
It’s pretty simple: You know who’s got it worse than college graduates? Those with just a high school diploma. Between 2002 and 2012, high school graduates between the ages of 25 and 34 saw their average wage fall by more $6,000—or 16 percent. Unemployment rates are much higher among Americans with no postsecondary experience, and this group is also far less economically mobile. Data from the Pew Project on Economic Mobility show that among children born in the bottom income quintile, those with a high school diploma were nearly five times as likely (47%) to remain in the bottom quintile as those who earned a college degree (10%).
In other words, even with the high price and stagnant returns, the wage premium associated with a college degree has remained robust, thanks in large part to the dismal fortunes of high school graduates. If you’re competing against a group whose wages and job prospects are cratering, it’s not hard to stay ahead.
But that doesn’t mean we don’t need alternatives, and fast.
The way forward
Progressives and the higher education lobby see the wage premium and argue that we need to cram more people into traditional degree programs and spend even more on financial aid to pay for it. Because the wage premium still exists, the logic goes, it is “worth it” to enroll in any college at any price.
But the spread between the cost of a degree and the labor market returns to one is also a tremendous opportunity for the kind of innovation and entrepreneurship that can unleash new ideas about how to teach, train, and certify individuals for the demands of the 21st century. Who says credentials have to be two years or four years long, or that credit need be awarded on the basis of time spent in class? Why can’t an organization other than a college provide the customized mix of skills training and general education you need to get the job you want?
Families still invest in the traditional product not because they think they’re getting a good deal, but because they want their child to get ahead and see no other alternative.
This is where conservative reform ideas can help. Higher education is heavily regulated, with federal rules and accreditation requirements that tend to protect the traditional system from new providers and greater competition. Deregulation, lower barriers to entry, and competition can invigorate a market that currently has too few choices that are too expensive.
In the 1970s, policymakers didn’t scold people for buying expensive airline tickets to get where they needed to go; instead, they cracked the market open and let new firms in to compete, creating new, more affordable options that better fit consumer’s needs. It’s time to import that thinking to higher education. Instead of telling parents their kid shouldn’t go to college, let’s tell them that we’re as frustrated as they are by the lack of worthwhile, affordable paths to economic opportunity. Then let’s create space for the options they need to take root.
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Stretching the Higher Education Dollar: How Innovation Can Improve Access, Equity, and Affordability
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