Education is doing a lot less for the economy than we all thought it would.

In response to recent articles by David Brooks and David Leonhardt, Ezra Klein put up three good blog posts yesterday on the income benefits of a college education. The first. The second. The third. Here is a summary of key points.

Going back to the 1980s there was a broad consensus of Left and Right that education, and especially expanded higher education, should be the cornerstone of America's future growth and individual economic progress. But "the education-as-panacea argument is being overwhelmed by contradictory evidence."

The income gap between high school graduates and college graduates is not widening because incomes of college graduates have accelerated through the last 2 or 3 decades. To the contrary, average incomes of recent college graduates have risen only modestly and not at all since 2001. The widening gap is because the incomes of high school graduates grew at a much slower pace or not at all.

Median incomes of college graduates have not increased as much as average incomes, meaning that most of the gains are going to some subset of college graduates. "[M]any college graduates are now forced to take jobs requiring only high school education."

Whether the increases are going disproportionately to graduates of elite colleges, those with engineering degrees, those with well-connected parents, or some other subset(s) is not reported.

For the source of the quotes and a longer analysis refuting the conventional wisdom about the value of higher education as the solution to all economic problems, go here. A somewhat older issue brief from Economic Policy Institute (cited by Klein) is here. If we care about the decline and grim prospects of the American Middle Class—and I'm not sure we do—we're going to need policy responses that go way beyond education.

Update on Saturday, June 7, 2008 at 02:43PM by Skeptic

The Overselling of Higher Education is a well-documented meta-study of the effects of higher education on employability, individual income levels, and economic growth.  It finds that many of the arguments for sending more youth to college are not supported by field studies of results.  For example, several studies report that many college graduates end up in jobs for which college training is not required.  (A quarter of travel agents and retail-sales supervisors, a third of flight attendants, and nearly half of aerobics instructors have B.A. degrees.)  [Update 9/27/09: 12 percent of mail carriers have college degrees.]  Only 2 of the 10 job categories projected to grow the fastest require college degrees.  States and nations that have a high percentage of college educated people do not necessarily have faster economic growth, and at least one study found a negative correlation. 

While the report acknowledges the importance of better education for those who go to college and beyond, it raises serious doubt whether sending more people to college would accomplish anything that can be measured in money. For today's marginal student--as distinguished from an average student--college will probably turn out to have been a poor investment for whomever pays the bill. 

Update on Wednesday, September 10, 2008 at 09:12PM by Skeptic

The numbers are in for 2007, and even the Ph.D.s lost ground from 2000 to 2007.  Those with professional degrees (J.D., M.D., MBA, etc) were the only educational group for which median incomes rose during this period, according to this article (including the graph below) in today's Wall Street Journal. 

The WSJ reports that "economists cite a number of reasons for falling wages for people with a bachelor's degree:"      

     Off-shoring of blue- and white-collar jobs
     Skilled immigrants competing for jobs in the U.S.
     Weak job growth kept pressure off employers to increase pay
     Employers to absorb rising healthcare costs instead of increasing pay

In addition, the article mentions that "many Democrats have blamed foreign trade for a big part of the rise in income inequality." 

In addition to these factors, we should consider that the law of supply and demand is not suspended with respect to education.  If we graduate more people with B.A. and B.S. degrees than there are jobs requiring their skills, the incomes of college graduates will decline and the trend of college graduates taking jobs for which no college is required will continue.  Perhaps one reason incomes for professionals have held up better is that the professional schools and licensing boards have limited the supply.   

The New York Times editorial page has previously acknowledged the role of globalization in holding down real income growth among U.S. households and increasing inequality, as have a substantial number of serious economists, summarized here and here.  If the WSJ is beginning to acknowledge this on its reporting side (using the euphemism "open borders" for "globalization"), could it possibly be that the WSJ editorial board will someday bend to reality? 

Update on Friday, October 9, 2009 at 10:39AM by Skeptic

Contrary to conventional wisdom and my own assumptions, spending on education has not declined in real dollars.  It has increased dramatically, and is double what it was in the 1970s.  Link.  Thus, we are getting worse results for more money and need to look elsewhere for the fundmental problems. 

UPDATE 6/6/10:  It should be emphasized that the linked report relates to elementary and secondary education.  In contrast, it is reported here that the inflation-adjusted level of taxpayer support for the University of California has declined by 50% in the last 25 years. 

Update on Friday, October 9, 2009 at 02:00PM by Skeptic

The buggy professor (Michael Gordon) joins the conversation about a Paul Krugman education post on Economists View and presents some very interesting data, which he also posted on his own blog. 

Update on Friday, November 26, 2010 at 07:50AM by Skeptic

The Great Recession has hit young college graduates harder than any other group. Their unemployment rate has increased by a larger percentage than any other group, and at least half of them are "mal-employed," according to the Center for Labor Market Studies at Northeastern University. 

Young college educated workers, particularly those 25 and under, however, have not fared very well over the past three years. They have experienced rising joblessness, underemployment, and malemployment problems (i.e. working in jobs that do not require a college degree). During the January-August period of 2010, we estimate that fewer than 50 of every 100 young B.A.-holders held a job requiring a college degree.

More detail at HuffPo. 

Update on Monday, January 3, 2011 at 09:37AM by Skeptic

The following chart from OECD via The Economist shows that 33% of US college graduates ages 25-29 are in low skill jobs.

Update on Friday, January 7, 2011 at 03:36PM by Skeptic

From a McClatchy News report in 2009. (See especially the adverse trend at the bottom of the graphic.) 

"New monthly survey data from the Center for Labor Market Studies at Northeastern University in Boston finds that during the first four months of 2009, less than half of the nation's 4 million college graduates age 25 and under were working in jobs that required a college degree. That's down from 54 percent for same period last year.

'''I've never seen it this low and we've been analyzing this stuff for over 20 years,' said center director Andrew Sum."



Update on Wednesday, February 9, 2011 at 08:55AM by Skeptic

Lawrence Mishel of EPI makes the major points of this post in The Overselling of Education: We need a better-educated citizenry, but the cure for increasing inequality lies elsewhere. He doesn't have room for much data in the article, but he does a good job of explaining why our economic and political elites, who have benefited greatly from the policies of the last three decades, want to focus on inadequate education as the supposed cause of our economic ills and better education as the solution--they don't want attention focused on the real causes of rising inequality, chronic unemployment, stagnant median incomes, and the hollowing out of the middle class.  He concludes:

The nation's productivity increased by 80 percent from 1979 to 2009, and good productivity growth can be expected in the future. It is not education gaps that have caused nearly all of those gains to be captured by the top but rather economic policies that redistributed economic and political power.

Update on Friday, May 20, 2011 at 09:56AM by Skeptic

Ezra Klein continues his fine reporting on the economic effects of education here.  He's borrowed the following charts from Catherine Rampell at NYT. Some majors are less disastrous than others, but overall only 55.6% of grads under age 25 have jobs that require college degrees, and 22% are working in jobs that do not. (I don't know whether the other 22.4% includes graduate students or if they are all unemployed.)