Is College Worth It?


Pushing for more college education won't reduce unemployment or cure the country's income inequality, Dan Indiviglio wrote in summarizing this paper by Lawrence Mishel of the Economics Policy Institute.

They're mostly right. The most important thing raising unemployment is soft demand, and the most important thing raising income inequality is massive wealth accumulation at the top, which is best illustrated by this graph showing the rise in earnings among the top tenth of a percent outstripping the 99th percentile by a factor of six:

earnings growth mishel.png

But I don't want you to walk away from Larry's good research thinking that college is losing its luster. Far from it: The recession has magnified the primacy of a college education.

If you want to understand the education premium in one image, it might be this chart that breaks down unemployment and salary in 2009 by education level. The implication is crystal clear: Learn more, earn more. The more education you have attained, the more likely you are to be employed and earn a higher salary. (Of course, there are underlying variables. It's also true that the more money your family makes, the more likely you are to finish college, earn more money, find employment..)

The recession didn't create the college premium. Rather, it drew in the tide and exposed the wage erosion that had taken place for non-college grads in the last four decades. Wages fell 18 percent for high school gradates between 1973 and 2007. But wages rose 10 percent for college graduates between 1973 and 2007. Most of that growth happened in the late 1990s, when health care inflation slowed and productivity gains increased. But the gap between college grads and high school grads has never been clearer.

For another angle into the education gap, consider this picture from EPI of the college premium  -- which is the wage gap between college and high school grads, adjusted for factors like race and age. Since 1979, the premium has steadily climbed. The bonus from a college education for men and women has doubled in 30 years. That's right. Doubled.

college premium.pngHere's the problem. The college premium isn't consistent across all industries. Some salaries have flat-lined, while other jobs have simply disappeared thanks to off-shoring and automated technology. Meanwhile, over the same time that the wage premium has doubled, the cost of a four-year college education has more than doubled. Student loan debt is near $900 billion, more than credit card debt in this county.

College education is an effective elevator to bring workers to higher-skilled, higher-paying levels in the labor force. The question is whether the ride is efficient. Today the elevator is so prohibitively expensive that students and workers are uncertain whether the floor they'll be dropped off justifies the cost of the ride.



A series of articles about education and job creation trends that will impact the next decade

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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