By Jackson Toby
Indebted college graduates have recently begun to ask whether a four-year college education is worth what it costs. According to an article in the Wall Street Journal on February 11, for example, 23-year-old Bryce Harrison, who graduated last May from Goucher College with a political-science degree and about $100,000 in student loans to repay, is now unemployed and is considering joining the National Guard. He had spent the summer working for his father, power-washing houses. "Was college worth getting in the amount of debt I'm in?" he asked. "At this point, I can't answer that."
In a front-page article on February 19, the New York Times reported that "The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job." This kind of doubt about the value of college is not new. Even in the middle of the 20th century, economists expressed skepticism about the economic payoff of a college education. In 1949, Seymour Harris, a distinguished professor of economics at Harvard, published The Market for College Graduates, a book that questioned the alleged financial payoff of going to college. It argued that the United States was sending more young people to college than the number of professional and business occupations likely to open up for them in the decades ahead. He admitted that his was a purely economic analysis and that the cultural and psychological benefits of a college education might well justify the investment of time and resources. Professor Harris's pessimistic assessment of college education as an investment was almost unanimously pooh-poohed at the time, although some distinguished educators agreed with him. Harvard president James Bryant Conant even opposed the G.I. Bill because he did not believe that the United States needed more college graduates.
Some Don't Expect a Lot of Money
Of course, getting high salaries are not the only reason for going to college. "College graduates" are an extremely heterogeneous group, including liberal arts majors in philosophy, English, music, and Icelandic literature; prospective social workers, actors, and ministers; career military officers; technically trained chemists, physicists, engineers, and computer scientists; and hundreds of other interests and majors. Long before grade inflation muddied the waters, studies of college graduates showed that those employed in some fields --and received high grades -- made more money than those employed in some other fields. Some college graduates find it easy to secure entry-level jobs in fields that offer prospects of career development, although perhaps not much in the way of money. College students who wished to become primary school teachers or social workers probably did not expect high salaries. Others discover that little or no market demand exists for the college curriculum that they have pursued. Nevertheless, the economic payoff of a college education is a consideration for most students. How does the increasing number of college enrollments affect that payoff?
A Forgotten Prediction
In 1949-1950, 432,058 bachelor's degrees were awarded, three-quarters of them to men. In 1949, the 17 to 24 population of the U.S. was 18,381,654, with males accounting for 9,153,410 and females accounting for 9,228,244.Veterans of World War II, most of them male, returned to the colleges they had left for military service, thereby swelling postwar college enrollments, as did veterans who had not been to college before their military service.
At first, the glut of college graduates that Professor Harris had worried about seemed unlikely to materialize. The number of college graduates declined as veterans passed through the system of higher education. By 1959-1960, only 392,440 bachelor's degrees were awarded; the proportion awarded to males dropped to 65 percent. However, by 1969-1970 the number of bachelor's degrees awarded rose again--to 792,656, while the proportion earned by males dropped to 57 percent. The main reason for the increase was, of course, the baby boom of 1946-1964, but another factor was the rising number of females who wanted to attend college. By 1979-1980 bachelor's degrees had climbed to 929,417, and women received 49 percent of them.
Professor Harris's gloomy prediction was largely forgotten. College administrators feared a decline in college enrollments. Demographers predicted that with the ebbing of the baby boom, the number of high school graduates would peak at about three million in 1976-1977 and would probably decline thereafter. Had this predicted decline in high school graduates occurred, resulting in a decrease in college enrollments, a scarcity rather than a glut of college graduates would have soon showed Professor Harris's assessment to have been spectacularly wrong. But this decline did not continue.
The Sharp Rise in College Enrollment
Higher proportions of high school graduates enrolled in college in the 1980s than had enrolled in past decades. In addition, sizable numbers of older persons in the work force who had missed out on college decided to enroll even if it meant continuing to work full-time and becoming part-time students. By 1989-1990 bachelor's degrees exceeded a million and continued to climb. By 2006-2007, 1,524,092 bachelor's degrees were awarded.
Professor Harris's prediction was based on extrapolation of the future needs of a relatively static American economy for professional, technical, and managerial employees, as well as on his assumption that education is subject to the law of diminishing returns. But far from being a static economy, the American economy grew enormously after World War II ended so that the job market was easily able to absorb most college graduates--contrary to the fears of Professor Harris and President Conant. Consequently, investment in higher education paid off, both for the individual and for society.
The Current Job Prospects for College Graduates
What about the job prospects of current college graduates? What has happened that explains why, like Mr. Hamilton, many college graduates cannot find positions that enable them to pay off their student loans? Is it simply a sluggish economy that is not generating enough jobs? As is well known, unemployment continues to hover around 9 percent despite stimulus programs undertaken by the Federal Reserve and the U.S. Treasury. Congress cannot repeal the law of supply and demand.
Furthermore, the job market of modern industrial society like the United States is extremely heterogeneous. The market for labor services includes the market for the services of college graduates; at the same time, a seller's market can exist for plumbers and pharmacists and there can be a glut of naval architects and sociologists. This is inevitable in a dynamic system in which young people are free to prepare for any career that interests them and in which schools and colleges are free to enroll as many students as they wish regardless of whether or not jobs exist for their graduates. Eventually, the lessons of the labor market are heeded. If too many naval architects are being trained in American engineering schools to get jobs in a field that is declining in the United States, fewer engineering students will specialize in naval architecture. But this lesson takes time to sink in; moreover, for those passionately interested in a field, hope trumps market considerations.
But besides the vicissitudes of the labor market, an additional factor contributes to the poor employment prospects of many college graduates. Too many have enrolled in college believing they could have four years of fun and graduate from any four-year college after majoring in any field -- gender studies, sociology, ethnic studies-- and obtain well-paying jobs easily. In fact, the market for college graduates has changed. Except for graduates of pre-professional curricula like engineering or pharmacy, employers can afford to be choosey, even for entry-level jobs. For young, inexperienced graduates who majored in liberal arts fields, prospective employers can afford to look nowadays for graduates who have taken difficult courses, have internships on their resumes, and have gotten top grades. As a result, some college graduates find jobs quickly and others drift for months and even years, unemployed or employed in jobs that do not require a college education, earning so little that they are compelled to move back with their parents and extend their adolescence. In short, too many students enroll in college without realizing that learning is difficult and that recruiters are sophisticated enough to distinguish graduates who majored in fun from graduates who took education seriously and had the ability to profit from diligent study.
One statistical fact supports the widespread belief that attending college is still worth it financially. The earnings of college graduates are, on average, twice the earnings of high school graduates. On the other hand, there have always been some college graduates who worked, at least temporarily, at jobs that did not require a college education and who earned less than the average high school graduate. Statistical studies conducted by labor economists at the Bureau of Labor Statistics, Daniel Hecker and Kristina Shelley, documented this phenomenon. In the late 1960s one in ten college graduates worked at jobs not requiring a college education: typists, file clerks, sales clerks, phone answerers; in the 1980s one in five college graduates held jobs usually performed by those with only a high school education. Furthermore, a decade ago the Bureau of Labor Statistics projected that the mismatch would get worse because the number of college graduates entering the labor force would grow to about 1,380,000 per year between 1996 and 2006 but the annual number of college-level jobs available during that period would be only 1,130,000.
The Wide-ranging Consequences of Unpaid Student Loans
A third of the graduates of four-year colleges have no student loans to repay. Some were lucky enough to have had parents or other relatives who financed their higher educations; others went to low-cost community colleges for their first two years before transferring to senior colleges, worked at low-paying jobs, and saved for college expenses. But two-thirds of recent four-year college graduates have sizeable student loans to repay, and as the cost of college keeps going up, the proportion of graduating seniors with student-loan debt has gradually been increasing. One possible effect of these loans is to trap graduates without good jobs in a prolonged adolescent limbo, including burdening their parents economically and discouraging the graduates themselves from assuming the responsibilities of marriage and children. Another paradoxical effect is to encourage graduates to undertake additional professional studies, whether interested in them or not, because repayment of existing loans is not due while students are still in school. It is a paradoxical effect because more student loans would probably be needed, enmeshing them deeper into debt.
To get back to college graduates like Mr. Hamilton, the unemployed graduate with $100,000 in student-loan debt: it seems obvious that, before making a student loan, someone should have considered this student's prospects in the job market. Failure to carefully scrutinize employment income was one of the factors that led to the housing bubble. The student-loan program began in 1965, too early for the lessons of the recent mortgage crisis to give forewarning. Congress might have required some relationship between the education the student was asking for help to obtain and the size of grants and loans. Congress considered instead only the financial need of students.
Times change. President Obama and the Congress are dealing with enormous annual deficits and a growing national debt. Both Democrats and Republicans are asking questions about the billion and a half dollars that the Department of Education spends each year on student grants and loans. Desirable though higher education is, it must compete with other desirable activities for which there is not enough money.
Jackson Toby is professor of sociology emeritus at Rutgers University, where he was director of the Institute for Criminological Research. He is an Adjunct Scholar at the American Enterprise Institute. This article draws upon his book, The Lowering of Higher Education in America.