Economists suggest college is a great value, as every year of higher education translates on average into 6% more pay every year (see Part I). But if you ask the American public, the answer is not so rosy.
A Pew Research Center survey from 2011 shows that the majority of Americans think college is less than a good value. This raises the question of what informs that judgment. Is it that tuition has gone up without a concomitant rise in quality of the education offered? Is there an underlying perception of unfairness? Do people see other avenues to getting a higher wage? Does the hardship of coming up with the funds during college cause so much pain that future earnings don’t feel like adequate compensation? Do people really think they are subsidizing research that doesn’t actually improve the quality of the education one receives?
Gaining a better understanding of what the real answers are would probably make a big difference to the overall college experience and to the way that colleges can market their services.
Bob Samuels of the AFT has calculated the cost to society of free public higher education. His magic number is a cost of $127 billion annually, a figure offset by a variety of savings. (For instance, we’d see a significant reduction in the cost of student loan programs. And we could reap more taxes by ending tax breaks on on education-related investments, which turn out to be a handy tax shelter for the rich.)
By my calculations Samuels’ total cost, never mind the offsets, would be approximately the same amount of taxpayer money as the cost of war since 2001.
I haven’t got a clue how to calculate the total social benefit of free college tuition at all public institutions of higher learning in the U.S., but I am pretty sure we’d get more out of it than we get out of the war in Afghanistan.
Freakonomics has two related podcasts on the benefit (part I) and the cost (part II) of going to college, and it comes to the conclusion that, yes, it is totally worth it. Every year of education adds 8% to your income every year, so those 4 years of college would result in 32% additional income every year. People with more education retire later, meaning that the years in college with little to no income are canceled out on the back end. (This is not to speak of the fact that people with more education are happier and healthier, presumably because their work is not nearly so unbearable.) In other words, higher education turns out not to be too expensive, after all, right?
Well, maybe not. Steve Dubner doesn’t dwell on this, but he’s undoubtedly reporting averages. And when you think about that, you have to figure that some people get a lot more return on their education than 8% per education year for every year they work. And others get less. What if you’re in a not-so-economically-viable major in a below-average school in a geography with below-average employment opportunities? Is it still worth it then?
Another very reasonable question Dubner forgets to ask is whether it is reasonable for a college education to cost what it costs, considering the social benefit we all derive from having a population of people ready to do the work that needs doing. That the average college grad will see a reasonable return on his or her investment does not mean that it is “priced” correctly or fairly. In fact, the cost of higher education is thoroughly irrational, especially in view of the fact that it is not entirely clear what creates the value. Is it what you learn? Is it just the piece of paper–the reputation of the degree? Is it the network you become part of?
About 20 years ago, I taught at Chicago State University–an institution where the question of whether it is worth it should be very seriously considered by all prospective applicants–nearly all my students said that, if given the option, they would buy their degree outright and skip the bit about learning. At the time, this merely struck me as a very sad commentary on the quality of the education that lay within their reach, and I gave it up and lit out for the territories as soon as I could. Now I fear they understood something about the real world which I was way too naive to appreciate.
In their book Scarcity, Sendhil Mullainathan and Eldar Shafir blame the apparently irrational act of taking out a payday loan (and taking out a second one to pay off the first, etc.) by poor people on the mindset induced by scarcity–that is, being poor makes it difficult to think about anything but getting money, the sooner the better. An interesting proposition.
In our research, we found some indications that talking about one’s financial straights leads to smarter decision-making, which would mean that if Mullainathan and Shafir are correct about the tunnel vision imposed by poverty, then talking to another person about the issue counteracts scarcity’s tendency to focus the mind on the getting of abundance ASAP.
The National Bureau of Economic Research recently released a study of the impact of contingent faculty at Northwestern University on student outcomes, concluding that they did better than their tenure-track counterparts. “We find consistent evidence that students learn relatively more from non-tenure line professors in their introductory courses,” the authors write. They also found that students in classes taught by contingent faculty are more likely to take another class in the same subject. Most interestingly, these differences “are particularly pronounced for Northwestern’s average students and less-qualified students.”
A couple of data points are in order:
1, There are more contingent faculty than tenured and tenure-track faculty in American universities, and they account for the overwhelming majority of courses taught.
2. At many universities, contingent faculty make at or even below the minimum wage. They typically receive a set amount per course–a pittance more often than not–that bears no relationship to the work required to do the work.
Bully for them that they are actually better teachers, and bully for the students that this be so. But exactly how does it compute that tuition has been going up by leaps and bounds year after year even as teaching happens more and more on the dirt cheap?
The New York Times DealBook reports that the number of pawn shops in the U.S. increased from 6400 in 2007 to 10,000 late last year. Not only do they offer small-dollar loans to those desperate enough for cash to put their prized possessions in hock, they are also offering financial services to people whom the banks no longer feel the wish to serve. Check cashing. Pre-paid debit cards. Money orders. All offered at a price, of course. It is just one more way in which the haves get sorted from the have-nots.
Just how does it make sense that poor people pay for services that the wealthy get for free?
Peter Buffett has a spot-on op-ed in the New York Times today, in which he calls out the complicity of philanthropy in a culture of exploitation and inequality, by which the right hand gives a little philanthropy as a sop to problems the profit-mongering left hand has created.
Especially relevant to the mission of FAIR Money is his indictment of philanthropic financial services to the poor:
“Microlending and financial literacy (now I’m going to upset people who are wonderful folks and a few dear friends) — what is this really about? People will certainly learn how to integrate into our system of debt and repayment with interest. People will rise above making $2 a day to enter our world of goods and services so they can buy more. But doesn’t all this just feed the beast?”
Buffett says he is not calling for an end to capitalism, he is calling for humanism.
FAIR Money has started talking about what it takes to empower people (of all levels of income) to participate financially on their own terms. In Buffet’s words: what does it take to stop feeding the beast? I hope we can arrive at an answer using a thoughtful, inclusive, participatory process.