The College Calculation

By DAVID LEONHARDT | NY Times
Published: September 24, 2009

The most subversive question about higher education has always been whether the college makes the student or the student makes the college. Sure, Harvard graduates make more money than graduates of just about any other college. And most community-college students will end up making far less than graduates of flagship state universities. But of course these students didn’t enter college with the same preparation and skills. Colleges don’t help to clear up the situation either, because they do so little to measure what students learn between freshman and senior years. So doubt lurks: how much does a college education — the actual teaching and learning that happens on campus — really matter?

A recession makes such doubt all the more salient. Last month, National Public Radio ran a segment called “Is a College Education Worth the Debt?” in which an economist noted that 12 percent of mail carriers have college degrees — the point being that they could have gotten the same jobs without the degrees. In January, “20/20” ran a similar segment, in which somebody identified as an education consultant and a career counselor summed up the case against college. “You could take the pool of collegebound students and you could lock them in a closet for four years,” he said, and thanks to their smarts and work ethic, they would still outearn people who never went to college. I heard a more measured version of these concerns when I recently sat down with a group of college students. They were paying tuition and studying hard, and yet they weren’t sure what they would find on the other side of graduation.

Along with all this skepticism, though, economic downturns also create one big countervailing force that pushes people toward college: many of them have nothing better to do. They have lost their jobs, or they find no jobs waiting for them after high school. In economic terms, the opportunity cost of going to school has been reduced. Over the course of the 1930s, the percentage of 17-year-olds who graduated from high school jumped to 50 percent, from less than 30 percent. Boys — many of whom would have been working in better times — made up the bulk of the influx. In our Great Recession, students have surged into community colleges.

So who is right — these students or the skeptics? It isn’t too much of an exaggeration to say that the field of labor economics has spent the past 30 years trying to come up with an answer. In one paper after another, economists have tried to identify the portion of a person’s success for which schooling can fairly claim credit. One well-known study, co-written by Alan Krueger, a Princeton professor now serving as the Treasury Department’s chief economist, offered some support for the skeptics. It tracked top high-school students through their 30s and found that their alma maters had little impact on their earnings. Students who got into both, say, the University of Pennsylvania and Penn State made roughly the same amount of money, regardless of which they chose. Just as you might hope, the fine-grain status distinctions that preoccupy elite high-school seniors (and more to the point, their parents) seem to be overrated.

The rest of the evidence, however, has tended to point strongly in the other direction. Several studies have found a large earnings gap between more- and less-educated identical twins. Another study compared young men who happened to live close to a college with young men who did not. The two groups were similar except for how easy it was for them to get to school, and the upshot was that the additional education attained by the first group lifted their earnings. “College can’t guarantee anybody a good life,” says Michael McPherson, an economist who runs the Spencer Foundation in Chicago, which finances education research. “But it sure ups the odds substantially.”

Earnings may be a flawed measure of an education’s value, but they’re about the only tangible measure we have. And the work that labor economists have done suggests that colleges do indeed deserve credit for much of the earnings gaps between their graduates and everyone else. The median earnings of full-time workers with bachelor’s degrees was nearly $47,000 in 2007, according to the Census Bureau. The median for someone who had attended college but failed to get a four-year degree was nearly $33,000, and the median for a high-school graduate was nearly $27,000. Compare these numbers with the typical education debt that a college student has on graduation day — $20,000 — and it’s clear that a college education is worth the debt. McPherson slyly points out that even the pundits and professors who suggest otherwise seem to understand this; they tend to send their children to college, often to quite expensive ones.

Yet the skeptics do make one crucial point. Nationwide, half of all students who start college don’t end up with a four-year degree. Not only do these dropouts spend less time in class, but they also miss out on the signalling benefit of the degree — a mark of those who, among other things, have the discipline to finish what they start.

Some would-be dropouts may stay in school if Congress approves a pending proposal to increase Pell Grants to needy students. Still, college tuitions are rising and resources are being cut — two factors that affect graduation rates. Federal spending cushions the blow but isn’t large enough to make up for state cutbacks. At Dyersburg State Community College, in northwest Tennessee, enrollment rose a staggering 28 percent this fall compared with last fall, but the state cut the college’s budget by 16 percent, thanks to the recession, Karen Bowyer, the college’s president, told me. For similar reasons, the University of California system plans to enroll fewer freshmen this year than last. Given the current debate in Washington, it’s worth noting that the rising cost of health care puts more pressure on state budgets than perhaps anything else.

When you look at what’s happening at Dyersburg State and dozens of similar places across the country, you’re left thinking that students understand that they don’t make the college. They need the college. The rest of us would probably say that they do, too. The clichés are familiar enough: the children are our future, I’ll be the education president, etc.

Yet when you look at our actual policies, you have to wonder. Many colleges and high schools still fail to do a good job, year after year, with little consequence. And in the deepest recession in a generation, at the very moment when education would be of most value, money for it is disappearing. It’s almost as if we’ve been convinced that college isn’t, after all, all that different from locking somebody in a closet for four years.

David Leonhardt is an economics columnist for The Times and a staff writer for the magazine.