Lunch at the Labs

The Bubble in Higher Education

There is a bubble in the cost of a higher education because the price paid has exploded compared to the value received (not unlike the recent bubble in housing). The current recession has begun to make people more aware of the problem but it goes beyond that. Last May, Mark Cuban gave a good summary of the situation in his blog,

        The Coming Meltdown in College Education & Why The Economy Won’t Get Better Any Time Soon

And more recently Jonathan James, a research economist at the Federal Reserve Bank of Cleveland wrote an economic commentary related to this:

        The College Wage Premium

But since he failed to consider what I think are some important points concerning this matter, I emailed him the following response:

In reference to your economic commentary dated 08/08/2012:

        The College Wage Premium
        http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm

I think the points you made to counter the prevailing thoughts about the college wage premium are good but they do not go nearly far enough.

When evaluating the value of higher education it is not good enough to just compare all those who go to college versus those all who do not, because generally the SMARTER students are the ones who who choose to continue their education. Instead it is necessary to compare those with EQUAL INTELLIGENCE and ability, some of who go to college and some who do not. What happens if you consider students with equal SAT scores and compare those who start their own business after high school with those who go to college? After considering the monetary cost of going to school (including paying off debt) as well as the lost years of income, who does better over a lifetime?

Also how much of the trouble that people without a college degree have with getting a job has to do with the hiring process itself? HR people who often do the hiring usually don't have a clue as to the what is required to do a specific job and much less how to evaluate someone to see if they do have the needed abilities. Hence all they have to go on is what is written on a piece of paper. In addition how much of the problem has to do with people thinking "I worked hard (suffered?) to get a college degree so you should too?".

I do think a college education is a good thing to have, but I think it is greatly overrated concerning having the skills to be a productive member of the workforce. This has long been a pet peeve of mine and now that we appear to be in a bubble with respect to tuition costs and student debt, something needs to be done. How much of the myth that a college degree is needed to succeed is due to the fact that professors need students to attend their classes so they have a job?

That was a month ago and I have not received a reply back.

Addendum.
Steve Randy Waldman in the second half of a very interesting interfluidity blog post says rational astrology is sufficient to explain a large college wage premium.