Friday, November 4, 2011

Thoughts on College

There’s been a vigorous debate all over the interwebs, particularly the financial blogs lately about college. Now that the Occupy movement has finally focused the nation’s attention on the outrageous wealth concentration in America, one common response is that it’s all about those with college degrees versus those without. The highly-educated are doing fine, the story goes. It’s only those how have not gone to college who are falling behind. This is a common theme among the “personal responsibility” crowd, because they can blame those who are falling behind with stagnant wages for not buckling down and hitting the books for their predicament. If they had only ponied up and gone to college, the story goes, they would have good jobs and nothing to complain about. David Brooks expounds this argument in the New York Times:
Then there is what you might call Red Inequality. This is the kind experienced in Scranton, Des Moines, Naperville, Macon, Fresno, and almost everywhere else. In these places, the crucial inequality is not between the top 1 percent and the bottom 99 percent. It’s between those with a college degree and those without. Over the past several decades, the economic benefits of education have steadily risen. In 1979, the average college graduate made 38 percent more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75 percent more.

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.

Today, college grads are much less likely to smoke than high school grads, they are less likely to be obese, they are more likely to be active in their communities, they have much more social trust, they speak many more words to their children at home.

Some research suggests that college grads have much bigger friendship networks than high school grads. The social divide is even starker than the income divide.

“Bullshit,” says Paul Krugman. He looks at the numbers and finds that even workers with college degrees are falling behind, and that the only people to see income gains are the top 1 percent, specifically the top one-tenth of a percent:
The budget office laid out some of that stark reality in a recent report, which documented a sharp decline in the share of total income going to lower- and middle-income Americans. We still like to think of ourselves as a middle-class country. But with the bottom 80 percent of households now receiving less than half of total income, that’s a vision increasingly at odds with reality.

In response, the usual suspects have rolled out some familiar arguments: the data are flawed (they aren’t); the rich are an ever-changing group (not so); and so on. The most popular argument right now seems, however, to be the claim that we may not be a middle-class society, but we’re still an upper-middle-class society, in which a broad class of highly educated workers, who have the skills to compete in the modern world, is doing very well.

It’s a nice story, and a lot less disturbing than the picture of a nation in which a much smaller group of rich people is becoming increasingly dominant. But it’s not true.

Workers with college degrees have indeed, on average, done better than workers without, and the gap has generally widened over time. But highly educated Americans have by no means been immune to income stagnation and growing economic insecurity. Wage gains for most college-educated workers have been unimpressive (and nonexistent since 2000), while even the well-educated can no longer count on getting jobs with good benefits. In particular, these days workers with a college degree but no further degrees are less likely to get workplace health coverage than workers with only a high school degree were in 1979.

So who is getting the big gains? A very small, wealthy minority.

The budget office report tells us that essentially all of the upward redistribution of income away from the bottom 80 percent has gone to the highest-income 1 percent of Americans. That is, the protesters who portray themselves as representing the interests of the 99 percent have it basically right, and the pundits solemnly assuring them that it’s really about education, not the gains of a small elite, have it completely wrong.

If anything, the protesters are setting the cutoff too low. The recent budget office report doesn’t look inside the top 1 percent, but an earlier report, which only went up to 2005, found that almost two-thirds of the rising share of the top percentile in income actually went to the top 0.1 percent — the richest thousandth of Americans, who saw their real incomes rise more than 400 percent over the period from 1979 to 2005.

Who’s in that top 0.1 percent? Are they heroic entrepreneurs creating jobs? No, for the most part, they’re corporate executives. Recent research shows that around 60 percent of the top 0.1 percent either are executives in nonfinancial companies or make their money in finance, i.e., Wall Street broadly defined. Add in lawyers and people in real estate, and we’re talking about more than 70 percent of the lucky one-thousandth.

And here’s the chart documenting the trend:

Krugman has also refuted this argument that inequality is nothing more than people who refuse to get an education falling behind several times on his blog:

This plays in to the whole “is college worth it” debate. With few job openings and astronomical costs, it’s hard to swallow the line that college is “necessary” and “worth it” that we’re constantly being fed. Yet economists keep pointing out statistics that the more educated people have much higher lifetime wages and lower unemployment. What the data appears to be saying, is that everyone is doing terrible, it’s just college graduates are doing less terrible. And it does not take into account the crushing debt burdens of those with degrees. Yes they have jobs and higher salaries, but after they pay their pound of flesh to the bankers, how much is really left over?

For another perspective, we can turn to Alex Tabarrok at Marginal Revolution. Fundamentally, he seems to agree with Krugman that soaring costs for degrees are not justified given income trends:

But, he points out that not all degrees are created equal, and that degrees in STEM fields (science, technology, engineering, mathematics) are still seeing a health return on investment. In fact, we need more STEM graduates, otherwise we will be facing economic difficulties:

Over the past 25 years the total number of students in college has increased by about 50 percent. But the number of students graduating with degrees in science, technology, engineering and math (the so-called STEM fields) has remained more or less constant. Moreover, many of today’s STEM graduates are foreign born and are taking their knowledge and skills back to their native countries.

If students aren’t studying science, technology, engineering and math, what are they studying?

In 2009 the U.S. graduated 89,140 students in the visual and performing arts, more than in computer science, math and chemical engineering combined and more than double the number of visual and performing arts graduates in 1985.

The chart at right shows the number of bachelor’s degrees in various fields today and 25 years ago. STEM fields are flat (declining for natives) while the visual and performing arts, psychology, and communication and journalism (!) are way up.

There is nothing wrong with the arts, psychology and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math. Moreover, more than half of all humanities graduates end up in jobs that don’t require college degrees and these graduates don’t get a big college bonus.

Most importantly, graduates in the arts, psychology and journalism are less likely to create the kinds of innovations that drive economic growth. Economic growth is not a magic totem to which all else must bow, but it is one of the main reasons we subsidize higher education.

The potential wage gains for college graduates go to the graduates — that’s reason enough for students to pursue a college education. We add subsidies to the mix, however, because we believe that education has positive spillover benefits that flow to society. One of the biggest of these benefits is the increase in innovation that highly educated workers theoretically bring to the economy.

As a result, an argument can be made for subsidizing students in fields with potentially large spillovers, such as microbiology, chemical engineering, nuclear physics and computer science. There is little justification for subsidizing sociology, dance and English majors.

Here’s the Times Economix blog about Taborrok’s post:

Of course, this sees technology as the only method of “innovation”, but I’ll have more to say on that later. Ran Prieur posted some good thoughts on this recently:
Back on the 15th when I wrote about college debt, I forgot about this post by Anne, Thoughts On Returning. Anne is in medical school, and points out something that's already happening with lawyers and will probably happen with doctors: there are a lot of them who can't find jobs, and at the same, there are a lot of people who need them but can't afford them.

In a healthy society, people who need a job done, and people who can do the job, are matched up. This is being prevented by a sick economy in which doctors and lawyers have such huge debts from medical and law school that they have to work for rich people and big business. This is what comes from the unholy union of education and lending: giant blocks of money own the labor of educated people, and thereby prevent that labor from going where it's needed.

Something that seems different, but is exactly the same: in New York City, Two Taxi Medallions Sell for $1 Million Each. A taxi medallion is just a piece of metal that gives a vehicle the legal right to operate as a taxi. Obviously a million dollars is much more than the economic value of driving a taxi. The problem is that the price has been driven up by speculators. People are buying them not for the value of driving a taxi, but the "value" of reselling them later. One result is that only very rich people can afford to own medallions. A more insidious result is that the rich owners can pull political strings to keep taxis rare: "Many owners have objected to a city proposal that would allow livery cabs to pick up street hails outside busy parts of Manhattan, saying such a plan would lower the value of their medallions."

This is what's wrong with America. The get stuff done economy has been made subservient to the leverage money into more money economy. Meanwhile, the get stuff done economy sneaks through the cracks. Here's an article on Brooklyn's dollar van fleet, The Illegal Private Bus System That Works. I expect something similar to happen with medicine. While M.D.'s are stuck in debt prison hospitals, people with no debt can afford to sell health care for a reasonable price -- but because they have no debt, they have no certification, so they have to work in the underground economy. As more and more people are priced out of the official economy, the underground economy will grow and thrive.

There are some points worth making here that are often ignored:

How recent is the data? Sure college has been worth it in the past, but what about going forward when American corporations are hiring more people overseas than domestically? Are baby boomers counted the same as twenty and thirty-somethings? That seems like a mistake.

The “average” college graduate includes graduates from Harvard, Stanford, Yale, Duke, etc. These people are usually already members of the 1 percent before they even set foot into college. How much are they skewing the data?

Not everyone has the skills or aptitude for a STEM career. Most people by nature are more visually and verbally oriented than mathematically oriented. That’s why you see majors like journalism and visual arts full of students. What are the rest of us to do?

If we tell everyone that only engineering majors have a future, then we will eventually have 1.) a glut of engineers, and 2.) a lot of lousy engineers. What’s tragic is people who are mathematically oriented going into useless fields like finance and economics. How does Tabarrok justify his own field (economics)? Does he tell his students at George Mason University to switch majors? Maybe he should.

Very few people can just drop out of the workforce for at least FOUR YEARS to get a degree. And many fields require, five, six, even ten years before you make any money! We make it practically impossible for anyone without an upper-middle class background to even have a shot at going to college. Some majors such as medicine, law, and I would say architecture, are practically impossible for anyone outside of the middle class to achieve.

We underestimate the extent to which a college degree has led to debt slavery. Typically the higher the pay, the higher the debt. So is debt slavery worth it because of the pay? Not everyone thinks so. Some people prefer their freedom. And what if the economy tanks? Remember, no one owes you a job! How can one be sure that the debt taken out for even a lucrative career will be worth it if there is no future growth? It’s really a form of gambling. There is not infinite demand for even STEM careers.

If we eliminate student loans without dealing with the cost issue, colleges will not become affordable again as some people claim. They will merely cater only to those who can afford their exorbitant prices, that is, children of wealthy parents (and sports stars). College administrators will not give up their feathered nests as long as they can find SOMEONE to pay. With job competition being what it is, they will continue to find them, including children of the wealthy from overseas. There will be no shortage. Thus, only rich people will be able to attend. Basically, we will be a de facto aristocracy (even more than we are already).

What is the culpability of corporate human resources departments which seem to use college degrees as a weeding-out tool? Why does the business community feel a college degree is needed for practically everything. Why does no one look at the business community’s responsibility in all this? ? It seems the only fields that do not require a degree are already filled by illegal immigrants. Again, what is the business community’s culpability? And why must the cost of vocational training be borne by students alone?


So here’s my proposal. Maybe it IS time we stop subsidizing all college majors. But if STEM careers are so important, we should be subsidizing them 100 percent, that is, college should be FREE for these fields; no strings attached. We should have done this for medical professionals a long time ago. This would go a long way in bringing health care costs down (If Cuba can do it…). Second, there is NO REASON to keep people out of the workforce for FOUR YEARS of mainly downtime to train them. Trying to make students “well-rounded” by forcing them to take classes that have nothing to do with their majors is a quaint notion, but it’s unnecessary and it doesn’t work. School doesn’t make you well-rounded. With all the information available online and libraries full of books, if you do not become well-rounded on your own, school isn’t going to do it for you. I’ve met plenty of Master’s Degree graduates who haven’t read a book in years and can’t find Africa on map, and plenty of high-school graduates who devour history and philosophy books and travel extensively. You can’t force people to be intellectually curious. That’s not what college is for. Either they’re going to be that way before they even arrive at college, or they won’t. College won’t change that. It is about vocational training, whether we like it or not. Two years of full time classes should be enough for ANYTHING. And by full-time, I MEAN full-time, as it eight hours a day, five days a week. We do that at our jobs, why don’t we do it at school? Most essential training comes on the job anyway, by necessity. As Charles Murray pointed out, even a brain surgeon does not need FOUR YEARS of pure classroom instruction (i.e. nothing hands-on) to do their job. If they don’t, neither does anyone else. The padding out of degrees over four years was fine when only wealthy upper-class kids went to college (or needed to). It’s a quaint notion held over from the Middle Ages. Now it’s killing us. And finally, do we even need private, for-profit colleges? If so, why? What is the private sector offering that is unique? We think everything belongs in the private sector, but competition actually drives up the cost of things while providing no useful benefit! In the realm of private goods, that may be beneficial as companies are theoretically compelled to innovate and improve their products to keep up with the competition. But in education? Is some university going to come up with a new branch of knowledge that only they teach? Is some university going to roll out a new and innovative type of calculus? Come on now. This free-market fetishism is ridiculous! Besides, these colleges seem to be nothing more than social clubs and breeding grounds for the 1 percent.

To conclude, here are some good posts on the student debt debacles:

Decline of the Empire has done many great posts on the topic. Read it and weep:

RELATED: Why Science Majors Change Their Minds (It's Just SO Darn Hard) via NYT. It's not just as easy as telling everyone to get a math and science degree. That won't solve our problems.

ALSO RELATED: Where the Women Are: Biology.

More than 86,000 biology majors graduate each year, to compete for entry-level positions in research, environmental monitoring, health care and teaching. Salaries start at $40,000 to $50,000 a year, college placement offices say, compared with $55,000 to $65,000 for graduates in computer fields and engineering.

Spending six or more years to earn a doctorate doesn’t pay off, either. There is such a glut of biology Ph.D.’s that only 14 percent find tenure-track academic jobs within six years.

Younger Ph.D.’s face the biggest problems. Many entered graduate school when federal financing for health research surged a decade ago. But most of the money to fight cancer and search for other breakthroughs went to established researchers. At the same time, in the face of financial realities, universities are clamping down on tenure-track spots in all fields. As a result, many new Ph.D.’s are stuck in one postdoctoral research job after another, helping run laboratories set up by senior scientists, waiting to see if they can win permanent academic appointment.

Starting pay is low, $37,000 to $40,000, and more than a third of biologists are still working in these and other non-tenure track jobs six years after receiving their Ph.D.’s. Others teach at community colleges or high schools, jobs that would not have required as much training, or work for industry or the government.

Federal, state and local agencies employ 40 percent of biologists at all degree levels, and they are tightening their budgets. The pharmaceutical industry has laid off 300,000 workers over the last decade, and is outsourcing basic research jobs to India and China.

But there’s cheerful news: biotechnology companies, which fueled much of the growth in jobs in recent decades, are still expanding, albeit at a more moderate pace. The Bureau of Labor Statistics also suggests that growth in health and environmental technologies will offset some of the cuts. And women in biology can take solace in knowing they make more than humanities majors, who are lucky to start in the mid-30s.

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