Is there an education market bubble?

This is somewhat a follow-up to my previous meandering post about Declining by Degrees, the PBS documentary about higher education. At the end of that post I wrote myself into this question, and not being an economist, it’s a genuine question.

To reiterate briefly, one of the important points made in the documentary was that in the 80s we began to say that getting a college degree would mean earning $1 million more over a lifetime. In adopting this perspective we began to move from thinking of higher education as a general social good (to be supported largely by the state) to a private good, an investment in one’s personal human capital. Much like a house, you invest and borrow money with the idea that you are making an investment that will pay off. Not long ago this was especially true, and we all know the end of that story.

But here’s the thing I wonder. When 25% of adult Americans had four-year degrees, maybe on average they earned $25K more per year than the other 75% (though you’d also wonder what the median was). But what happens if 35-40% of Americans have four-year degrees, are they still going to out earn the other 60-65% by the same margin? And if they do, will it make as much of a difference?

Then factor into that all the people getting undergraduate degrees in China and India now.

We should all know this. 100 years ago, it was unusual to have a HS diploma. It was a degree that had value. It still does have some value, but not much. I don’t know if a undergrad degree will ever become the equivalent of a HS diploma, but a two-year degree might. And a four-year degree will be worth relatively less and an increasing number of people will be headed to grad school, which in turn will devalue that degree. When every public school teacher in NYS has a masters degree, what does that do to the value of the degree?

My point is that you need more education just to stay in place. You can’t invest $20K in college and borrow another $20K with the idea that a college education is going to buy you a step up into the next economic class. Yes, it may be the case that our new economy will require a better-educated workforce. It used to be the case that you could be a middle-class factory worker without tertiary education. That’s disappearing. Now you need the college degree to afford the exact same house that factory worker lived in. Except now you also have massive student debt.

So can we really continue to say that a college education is a private gain? Or do we have to recognize that it is increasingly a social necessity, a cornerstone to our national economic security? Once upon a time we made K-12 education compulsory. I don’t think we can/should do that for tertiary education but I think we need to consider funding higher education in a way that doesn’t begin with the premise that its an investment that is going to pay off on a personal level. There is a big payoff but it is in strengthening the overall education of our workforce, not in the relative strengthening of one individual’s earning power as compared to her neighbors.

You aren’t going to be able to flip your degree the way people used to flip houses.

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