America Needs More College Graduates....and a sermon in economics

Do we really need more college graduates?    Is college going overrated?  In my last post, I wrote about our work with the Minnesota College Access Network,  which is promoting efforts to increase dramatically the number of students who go to college.  Their idea is that K-12 education should inculcate a "college going culture."   Historically, we have created college-going opportunity -- that says that we provide opportunities for young people who choose to take advantage of it.   The College going culture idea says, let's run our school as though college (or other post secondary education) is the first choice for everyone:  "going to college is what we do here", we say in a college going culture.

Now as we promote this idea, more kids by far going to college, there has been a counter argument that suggests that college is over-rated, that we are pushing too many kids to go to college.   Now a new report, Under-Educated American by  Anthony P. Carnevale and Stephen J. Rose and the Georgetown University Center on Education and the Workforce, argues that actually we are in grave danger of producing way too few college graduates.     These labor economists argue that

• The United States has been under producing college-going workers since 1980. Supply has failed to keep pace with growing demand, and as a result, income inequality has grown
  precipitously.
• If we continue to under produce college educated workers, the large and growing gap between the earnings of Americans of different educational attainment will
  grow even wider.  
• The wage premium (for college degrees) currently stands at 74 percent, a historically high rate that implies the economy would benefit substantially from additional workers with a Bachelor’s degree.

They argue, based on persuasive data, that the income gap between college graduates and persons without college degrees is rising to historic proportions.   That wage gap, they explain is a symptom that there is a relative oversupply of non-college graduates as compared to college graduates.  The law of supply and demand says just that:  wages are rising for one, because there is an under supply as compared to the other.  They write:

Our analysis of wage and employment data shows that the United States has been under producing college-educated workers for decades. Post secondary education is in high demand among employers—and as the recovery takes hold and hiring resumes, it will continue to be in high demand. The under supply of post secondary-educated workers has led to two distinct problems: a problem of efficiency and a problem of equity. Without enough talent to meet demand, we are losing out on the productivity that more post secondary-educated workers contribute to our economy. Moreover, scarcity has driven up the cost of post secondary talent precipitously, exacerbating inequality.

See also an article in the New York Times:  Even for Cashiers, College Pays Off  As the Times reports:

Using an economic growth model pioneered by noted labor economists, the study finds that if we are to make up for lost ground in post secondary attainment and respond to future economic requirements, we will need to add an additional 20 million post secondary-educated workers to the economy by 2025. This includes 15 million new Bachelor’s degree holders, 4 million workers with non-degree post secondary credentials, and 1 million Associate’s degree holders. In the new report, The Undereducated American, the Center demonstrates that adding these workers will boost GDP by $500 billion, add over $100 billion in additional tax revenues, and stop and begin to reverse the growth of income inequality. Many of these additional graduates could come from the half a million students per year who graduate in the top half of their high school class but do not go on to college.

Now, I want to pause to point out that we must distinguish a separate economic issue -- the question whether the cost of a college education is appropriate to the reward.   There are many who argue that the cost of college education is rising too fast in comparison to the return on a college degree.   The issue that is discussed in the "Undereducated American" is somewhat different.  The authors are claiming that there is an under supply of college graduates, that this under supply is growing more serious and that under supply is destined to increase the wage gap between college graduates between college grads and others:

The relative wages of college-educated workers have been rising much faster than the wages of people with a high school diploma. The laws of supply and demand are the best single indicator of whether the United States is producing enough, too few, or too many college graduates.  

We need to be far more proactive in assuring that more students enter college and graduate successfully:

A clear trend has emerged: The United States is losing ground in post secondary education relative to our competitors. President Obama and other leaders are rightly alarmed at our current position and have called on the nation to redouble its post secondary education efforts to regain a competitive edge. The significance of these rankings goes beyond mere bragging rights— increasing our supply of skilled labor is central to the vitality of the U.S. economy. It is no coincidence that the expansion of American higher education occurred as the nation was enjoying economic growth and global economic domination. Education was a primary driver of that growth.

What must we do.  The report argues that : "Any strategy to increase the number of college graduates must be based on improving the quality of graduating high school seniors; otherwise, we cannot produce the additional college graduates needed to meet the desired goal."  the cost of highly qualified teachers is going to rise as well.   Why?  Not because of unions or incompetent school board members, but because there is an under supply of well educated people, and that under supply is is going to increase the price of educators.  

Now I promised a bit of an economics sermonette and here it comes.    We can't produce significantly more college graduates...we can't produce significantly more college-ready high school graduates, without more resources and a more accountability too :  If we want to increase more well educated students, we need to assure that our schools are accountable, true.  We need to reform what needs to reform.  But the people who argue that schools can be reformed and starved to death financially are ignoring the fact that it takes value to create value.  The more we reform our schools, the more productive that they are the more its going to cost to produce that extra value; that is market economics.  Economics rewards productivity with additional revenue, and if you want to reap those rewards at the outset, you need to invest more resources to reap that reward.   If you believe that we can starve schools financially while making them far more productive, then you don't really believe in market economics and you don't understand what causes wages to go up and to go down.  Value comes from productivity, and productivity is rewarded with higher wages and more resources.  The two go hand in hand.  If we want to produce more high paid workers, we are going to have to insist on accountability and greater investment in the people who we hire to accomplish the mission.