WARNING: This Degree May Make You No Better Off FinanciallyPosted: November 1, 2011 | Author: Greg Linster | Filed under: Higher Education | 7 Comments »
Economics dictates how the world works. I didn’t learn this from my father, who is an academic economist, or from my undergraduate schooling in economics, or even from my first year of graduate studies in economics. Rather, I learned this from simply being alive. In both a theoretical and practical sense, economics is the study of scarcity and nothing in life is immune to the forces of economics, including higher education.
In the classroom, I’ve engaged in debates about what makes something valuable and what ought to be valued. There is, however, one thing that I’ve never heard discussed in an economics classroom: is higher education worth it? Or, in economic parlance, do the benefits of higher education outweigh the costs?
This is a tricky question, however, because I think there is a difference between ‘schooling’ and ‘education’ that is oft ignored in the discourse around this topic. ‘Schooling’ is largely about garnering credentials and ‘education’ is largely about learning; schooling is a ‘results oriented’ process and education is a ‘process oriented’ process. Sometimes there is some overlap between the two, but not always.
In economically positive terms, we live in a society in which schooling is valued more than education is valued. This isn’t necessarily wrong, it’s just how things work in a highly specialized economy. I think it’s important to acknowledge this point when talking about the distinctions between schooling and education. If one wants to increase their chances of financial success in a highly specialized global economy, then credentials don’t hurt. If one wants to increase their chances of being a decent human-being than getting an education won’t hurt either.
In a society that largely values financial success, it’s not surprising to learn that the number one reason most people choose to attend college in modern times, then, is because they believe that having college credentials will increase their lifetime earning potential. In fact, high school students are inundated with this message and with the statistical evidence supporting it.
It’s certainly true that, on average, those with college degrees earn more than those without degrees. Average, however, can be a misleading term. Psychological research consistently shows us that, in general, people overestimate their own abilities when compared to the average because we look at ourselves in what UVA psychology professor, Jonathan Haidt, calls a “rose-colored mirror”.
As any statistician will quickly notice, some graduates will earn significantly more due to their degrees and for some it will not make a difference. This wouldn’t be problem if a financial return weren’t necessarily expected; however, most people expect a financial return on their education investment. Somewhere along the way, we forgot to tell young people that twelve percent of mail carriers have an undergraduate degree. There is nothing wrong with being a mail carrier with a college degree in the slightest, but it would be somewhat sad to learn that many of these mail carriers thought their degree would improve their financial prospects.
For most young people, it’s fairly evident that most of the best paying jobs in today’s economy require some form of schooling credentials. What’s not always tacitly understood is what makes those credentials valuable or the ruthless competition that occurs to get those jobs. As any economist will tell you, the important thing to note about credentials is that they become increasingly valuable as a signaling mechanism when they are scarce. When only a few people have college degrees in a job market, they stand out to potential employers. What happens, however, to the signaling mechanism when everyone graduates from college? The answer is simple: the degree becomes less valuable as a signal if everyone has one or can easily attain one. Employers must find another way to find the best candidates.
In today’s economy, many people are frustrated with a system in which they apparently didn’t fully understand. We’ve told our young people that schooling will help them make more money over the course of their life and most of them go to college with an ingrained belief that a college degree will help earn them more money over their lifetime. They are thus disappointed to find out that this isn’t always true. By telling lies, we’ve inflated their expectations into a bubble that is bound to burst with disappointment.
There is some good news, however, for those who want to drop out of the credentials arms-race. If one has ambitions to pursue a career or entrepreneurial dreams that don’t require credentials they can still school themselves at a fraction of the cost. It has never been easier and cheaper to become schooled if you live in a developed country with access to the Internet. A financially expensive formal schooling isn’t necessary when there is a vast amount of technical knowledge that can be consumed online and at libraries for free. This isn’t devaluing the hard fought knowledge that is won in academia, but merely helping to share it with people who may not otherwise be able to afford it.
Higher education was never meant for everyone and when push comes to shove, for many people the financial costs of school simply outweigh the financial benefits. This should not be kept a secret. We should stop lying to high school kids and pretending that this reality doesn’t exist. Colleges and universities should also try to drive this point home. WARNING: This degree may make you no better off financially.
I’m sure many people on the business side of academia scoff at this idea because it would decrease enrollment and thus decrease the institution’s bottom-line. The reality is that this is true, but it is also necessary. Schooling is a business, but education shouldn’t be.
I believe that those who recognize the non-financial value in a formal education will analyze their decision in non-financial terms and move onto higher education regardless. Alas, I think these are the exact kind of kids we want moving on into the higher education system anyway, not the ones who are simply money hungry.