By
Robert Reich
This
is the time of year when high school seniors apply to college, and when I get
lots of mail about whether college is worth the cost.
The answer is
unequivocally yes, but with one big qualification. I’ll come to the
qualification in a moment but first the financial case for why it’s worth going
to college.
Put simply,
people with college degrees continue to earn far more than people without them.
And that college “premium” keeps rising.
Last year,
Americans with four-year college degrees earned on average 98 percent more per hour than people without college degrees.
In the early
1980s, graduates earned 64 percent more.
So even though
college costs are rising, the financial return to a college degree compared to
not having one is rising even faster.
But here’s the
qualification, and it’s a big one.
A college degree
no longer guarantees a good job.
The main reason it pays better than the job of someone without a degree is the
latter’s wages are dropping.
According to the Federal Reserve Bank of New
York, 46 percent of recent college graduates are now working in jobs
that don’t require college degrees. (The same is true for more than a third of
college graduates overall.)
Their employers
still choose college grads over non-college grads on the assumption that more
education is better than less.
As a result,
non-grads are being pushed into ever more menial work, if they can get work at
all. Which is a major reason why their pay is dropping.
What’s going on?
For years we’ve been told globalization and technological advances increase the
demand for well-educated workers. (Confession: I was one of the ones making
this argument.)
This was correct
until around 2000. But since then two things have reversed the trend.
First, millions
of people in developing nations are now far better educated, and the Internet
has given them an easy way to sell their skills in advanced economies like the
United States. Hence, more and more complex work is being outsourced to them.
Second, advanced
software is taking over many tasks that had been done by well-educated
professionals – including data analysis, accounting, legal and engineering
work, even some medical diagnoses.
As a result, the
demand for well-educated workers in the United States seems to have peaked
around 2000 and
fallen since. But the supply of well-educated workers has continued to grow.
What happens
when demand drops and supply increases? You guessed it. This is why the incomes
of young people who graduated college after 2000 have barely risen.
Those just
within the top ten percent of college graduate earnings have seen their incomes
increase by only 4.4 percent since 2000.
When it comes to
beginning their careers, it’s even worse. The starting wages of college
graduates have actually dropped since 2000. The starting wage of women
grads has dropped 8.1 percent, and for
men, 6.7 percent.
I hear it all
the time from my former students. The New York Times calls them "Generation Limbo" — well-educated young adults “whose
careers are stuck in neutral, coping with dead-end jobs and listless
prospects.” A record number are living at home.
The deeper
problem is this. While a college education is now a prerequisite for joining
the middle class, the middle class is in lousy shape. Its share of the total
economic pie continues to shrink, while the share going to the very top
continues to grow.
Given all this,
a college degree is worth the cost because it at least enables a young person
to tread water. Without the degree, young people can easily drown.
Some young
college graduates will make it into the top 1 percent. But that route is
narrower than ever. The on-ramp often requires the right connections
(especially parents well inside the top 1 percent).
And the
off-ramps basically go in only three directions: Wall Street, corporate
consulting, and Silicon Valley.
Don’t get me
wrong. I don’t believe the main reason to go to college – or to choose one
career over another — should be to make lots of money.
Hopefully, a
college education gives young people tools for leading full and purposeful
lives, and having meaningful careers.
Even if they
don’t change the world for the better, I want my students to be responsible and
engaged citizens.
But when
considering a college education in a perilous economy like this, it’s also
important to know the economics.
ROBERT
B. REICH, Chancellor’s Professor of Public Policy at the University of
California at Berkeley and Senior Fellow at the Blum Center for Developing
Economies, was Secretary of Labor in the Clinton administration. Time Magazine
named him one of the ten most effective cabinet secretaries of the twentieth
century. He has written thirteen books, including the best sellers “Aftershock"
and “The Work of Nations." His latest, "Beyond Outrage," is now
out in paperback. He is also a founding editor of the American Prospect
magazine and chairman of Common Cause. His new film, "Inequality for
All," is now available on Netflix, iTunes, DVD, and On Demand.