Education: the Sad Truth

As suggested in President Obama’s speech last night, a little over 30% of American students don’t graduate from high school. The sad truth is that Americans are keen appreciators of market forces and they’re mostly just responding to the market.

The sad truth is that the increased lifetime earnings for college grads is pumped up by aggregating the high compensation paid to some college grads, like doctors of medicine, with that of all college grads. We graduate something like 13,000 MD’s per year. There’s something like 5 million people in an age cohort at the K-12 level. The number of doctors graduated is, essentially, fixed. The number doesn’t go up and down depending on population growth, etc. We graduate about the same number of doctors today that we did 25 years ago. Every kid won’t grow up to be a doctor. We prevent it.

The sad truth is that the median income for plumbers and electricians, neither of which require education beyond high school is about $40,000 per year. The median income for college grads is about $43,000 per year. That translates into a difference in income of $135,000 (45 years X $3,000 per year) between the two. The starting plumber or electrician will have worked the four years, earning income. If we guesstimate the earning during those four years as $100,000 (4 years X $25,000 per year), the difference dwindles to just $35,000.

The cost of a four year public school college degree is about $10,000 per year ($7,000 tuition, $3,000 books, fees, lodging, room, board, etc.) or $40,000. The college grad starts out with a boat anchor around his or her neck.

But not so fast! That $43,000 includes those with professional degrees who make a lot more (roughly $85,000 median annual salary). When you disaggregate the post-graduate and professional degree holders from all college grads the average is actually less than $40,000 per year.

Translation: getting a college degree doesn’t make economic sense if you can get a decent job that doesn’t require a college degree. And there’s the rub.

The sad truth is that over the last eight or so years most of the job growth has been in government and its handmaiden industries, healthcare and education, and construction. That growth in construction meant that avoiding college made sense and that’s what a lot of kids did.

However, the persistence theory is a lousy way to predict the future and that’s where we are right now. Nobody expects a lot of growth in construction. Unless, of course, that’s the direction the stimulus package spending takes us in and we’ll be right back to incentivizing avoiding a college education.

There are lots of other uncomfortable truths about education. For example, we don’t graduate a lot of engineering or hard science grads because those areas of study are tough and we aren’t producing jobs in engineering or hard sciences anyway (at least not for undergrads). Want more engineering and hard science grads? Stop issuing H-1B and L-1 visas and penalize companies who offshore jobs. Do more manufacturing over here.

Another uncomfortable truth: a higher dropout rate is the concomitant of universal education. Note, too, that 20% of the kids in the K-12 age groups speak a language other than English at home (more than two-thirds of them Spanish). That means that they’ve got special impediments in their educational careers including, in some circles, social pressure to quit school and start earning money.

In conclusion, we really need to decide what kind of society we want to be. If we want to found our future on people with higher degrees, we’ve got to make it worthwhile for kids to pursue those degrees. That means there’s got to be a job for them at the end of all of the investment, time, and sweat. And that, in turn, means we’ve got to stop importing labor and offshoring the jobs that require college degrees. Or else start growing much, much faster than we have in the last ten years, which nobody knows how to do.

Note that I’m not recommending this course of action. I’m just pointing out the obvious. We have some hard decisions ahead.

7 comments… add one
  • If you’re willing to study hard enough and choose a tough field, the good paying jobs are there. If not, you either drive a UPS truck or master “Do you want fries with that?”.
    Global competetition is just that. If you are as good as an import can be, proximity gives you the job. Not sure if salary is affecting the market, though.

  • Tom Strong Link

    While I think you may be on to something, there’s a fundamental difference between not going to college and not graduating high school.

  • Kelly Link

    I wish some of that government ‘stimulus’ directed toward higher education was instead used to promote On the Job Training. Why not create some incentives for employers to train their own workers? Why not reward them for giving a smart person a job *right now* rather than force them to spend $$$$ on college in the vague hope that they will find employment afterward?
    There are plenty of jobs out there that could follow that model. Heck, I used to have one myself. If the administration wants to grow a much, much bigger computer infrastructure for the health care industry, why not make a lot of those jobs OJT? (I’m speaking of the many clerks that will be needed to put all medical records online, for example.)

  • Tom Strong Link

    Kelly, part of the stimulus bill includes $750 million for workforce development.

    Dave, my apologies – after rereading the speech I see that you were basically following Obama’s train of thought.

  • Kelly Link

    Well, I heard that before the speech, but it isn’t clear to me what “workforce development” means. Can you clarify?

  • Tom Strong Link

    There’s a summary of all the workforce development elementshere.

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