Saturday, April 16, 2011

The College Bubble

In a recent article in the Washington Examiner, Glen Reynolds suggests that the higher education market is in a bubble of rising costs, driven by the perception among parents and children that a college education leads to higher earnings. The statistics do show a strong link between having a bachelor's degree and earning more. But does a bachelor's degree cause higher earnings or is there another reason for the association?

Reynolds notes that a college education can help people make more money in three ways: by giving them skills that pay well, by providing them with valuable social networks, and--here's the kicker--by providing "a credential that employers want, not because it represents actual skills but because it's a weeding tool that doesn't produce civil-rights suits as, say, IQ tests might."

Take a look at the job postings of any corporation, government, or university, and you soon discover that those without a bachelor's degree need not apply unless the job is janitor or parking lot attendant. Most employers have erected the barrier of a bachelor's degree as the minimum qualification for any job that pays a middle class wage. It could be that having a bachelor's degree does not cause higher earnings. Instead, the causal relationship flows in the other direction. Higher earnings are caused by the requirement that anyone who wants a well-paying job must have a bachelor's degree. For many jobs, the bachelor's degree barrier has no practical purpose. It is simply a hiring convenience for employers.

How do you untie this knot and free young adults and their parents from the frenzy to get a college degree at any cost? Good question.

1 comment:

Amy said...

"How do you untie this knot and free young adults and their parents from the frenzy to get a college degree at any cost?"

It is a good question.

It's painfully obvious to me as well that a BA is weeding tool, nothing more, nothing less. But now that it's there it's hard to dislodge.

My own personal strategy is plan to get that piece of paper for my kids as cheaply and quickly as possible. That means community /jr college and then State U, possibly all while living at home. If they are ready, I'm also planning to have them start college classes in high school. That also gets them out the college door earlier.

I was very fortunate to have a "resort" college experience. However, costs have spiraled too far out of control. It's not worth it to mortgage our or their future when employers hardly look at which college you went to.