More than twenty years ago when I started focusing on higher-education policy work, the chant from the cheerleaders was “the college wage premium!” Supposedly, everyone who plunked down the money to get a degree would thereby gain the huge benefit of the premium. Politicians chattered about how college graduates earned a million dollars more than high-school graduates. Pushing more and more people through college was seen as a means of ensuring economic growth.
Such thinking was mistaken then and, in recent years, it has become increasingly evident that college degrees aren’t “investments” with guaranteed payoffs. In today’s Martin Center article, Jack Salmon of the Mercatus Center looks at the evidence.
He writes, “Barack Obama proclaimed the orthodox view of college in 2009: Sending every young person to college is necessary to both promote equity and maintain US competitiveness in the world. Under this view, more federal investment to push high school graduates into college is a ‘human capital investment’ that leads to higher lifetime earnings.”
Back in the early years of America’s big college campaign, there were relatively few graduates who were mostly very good students, who went through fairly rigorous academic programs. Naturally, they landed good jobs. But as the campaign progressed, weaker and weaker students were drawn into college, and they learned less as schools let academic standards slip to keep them content.
As a result, many college grads these days end up in low-paying jobs that don’t call for any advanced study. Salmon writes, “The top-down push to drive up enrollment rates means that more graduates end up in low-skilled jobs earning low wages, while fewer college graduates get good non-college jobs.”
Bye-bye, wage premium. If students want to enhance their earnings prospects, they need skills that are in demand. Some college programs give them that, but many don’t.
Salmon concludes, “The orthodox top-down approach of increased federal aid and arbitrary enrollment targets will not serve to remedy this problem. Instead, policymakers should approach the issue of stagnation in the college wage premium by better aligning skills with labor market demand.”