Too Much For Too Little

Peter Wood

Richard Vedder’s Innovations post, “Universities and Income Equality: New Evidence and Conjectures,” deserves serious attention. I was going to post a comment, but it struck me as perhaps more useful to offer some additional context.

Vedder offers a tentative finding that since 1970, we have had diminishing returns in the attempt to reduce income inequality by expanding the percentage of the population that holds college degrees. His finding contradicts a number of other studies and those differences will have to be sorted out. But, unlike those other studies, his finding makes perfect intuitive sense.

It also fits with several other forms of evidence. We learned back in January from Academically Adrift, Arum and Roksa’s study of the results of the Collegiate Learning Assessment, that overall about 36 percent of college seniors have made no significant cognitive advance since their freshman year. We also have Richard Vedder’s analysis of Department of Labor statistics from last October showing that the preponderance of growth in bachelor’s degrees in the last two decades has served mainly to increase the number of college-educated workers in fields in which those degrees are unnecessary. His roll call:  “Over 317,000 waiters and waitresses have college degrees (over 8,000 of them have doctoral or professional degrees), along with over 80,000 bartenders, and over 18,000 parking lot attendants. All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS [Bureau of Labor Statistics] says require less than the skill levels associated with a bachelor’s degree.”

I don’t want to neglect the reply that is sometimes offered to numbers like these: that these are graduates temporarily placed in low-paying jobs but who will sooner or later get on their feet. Kevin Carey has been conspicuous among those offering this sweeter assessment of where we stand. Surely he is right about some of those underemployed graduates, but 17,000,000 is awful lot of people standing in line for their first break.

The simple fact is that we have inflated the supply of college-credentialed workers far beyond what the market can absorb in the form of high-skill, high-remuneration jobs. And this increase in supply has been accomplished in large measure by reducing (1) college-admission requirements, (2) the quality of instruction, (3) graduation requirements, (4) the rigor of evaluation, and (5) consequences of academic dishonesty. That increase has also been eased into place by the invention of new programs of study that have little intellectual substance and by the growing emphasis throughout higher education on “campus community,” identity group affiliation, ideological conformity, and activities conceived to be therapeutically beneficial. Diminished academic content on one hand, and diversion of attention to non-academic pursuits on the other, have stripped the college degree of much of its value as a guarantor of broad competency.

Of course, as the college degree has become less and less a reliable indicator of knowledge and skill, higher education has become ever more emphatic that its graduates are learning “critical thinking.” The importance of Arum and Roksa’s study is that it has punctured this conceit. They showed that perhaps a third of college graduates acquired “critical thinking” to any meaningful extent.

Employers by and large have assessed the situation correctly, and this would seem to be a key mechanism to explain the diminishing returns that Vedder now finds. The growth in the number of college degrees reduces income inequality only if those additional degrees translate into more prosperous careers than the graduates would have had absent their college credentials. This takes us into another contentious realm: Just how large is the lifetime-earnings premium for attaining a college degree?

The calculations are contentious because we have to account for the income a student forfeits while attending college instead of working and the extended costs of repaying student loans. Different analyses have produced a wide spread of results, but all of them have in common that the “premium” is far less than the $1 million figure that the College Board bandied about a few years ago.

The returns to the individual for “investing” in a college education are thus also diminishing, and the public is more and more aware of this. The New York Times yesterday offered a front-page story, “Online Enterprises Gain Foothold as Path to a College Degree,” on the growing segment of the degree-seeking public that is opting for lower-priced online degree programs. Perhaps the most telling observation: “Nationwide, almost three quarters of college students attend public institutions, and commercial career colleges like the University of Phoenix and Kaplan (renamed Purdue University Global) now make up almost as much of the remaining quarter as traditional nonprofit private universities like Stanford or Duke.” The article and the accompanying sidebars are chock-a-block with quotations from students who say they have weighed their options carefully and come out on the side of online programs as their best route to obtaining the credentials they want.

If this shift continues, and especially if it accelerates, we will need a lot of new calculations. The world of online degree programs differs so much from traditional residential colleges that it very likely has its own distinctive “premium” for lifetime earnings and it may also, in time, produce a different result for reducing income inequality.

In any case, the public has already noticed the diminishing market value of traditional college degrees and is responding accordingly. Americans know they are paying too much for too little, and they are beginning in substantial numbers to explore alternatives. Online programs look like they will be the main beneficiary of this disaffection, but the story is still unfolding. Vedder has also noted that the “elite top schools” benefit from the diminished value of ordinary college degrees. The “Uber College Graduate,” as he puts it—the graduate of Harvard or Stanford—still has an edge in finding one of those increasingly scarce high-paying jobs for which college skills really are a prerequisite.

A wise college president right about now would be looking for ways to tighten admissions standards, introduce a rigorous core curriculum, wipe out grade inflation, strip away the ideological folderol, and in every other way make his institution identified with graduates who reliably possess a first-rate education. Colleges that offer that—really offer it rather than just proclaim they do—will thrive in the years ahead. The others will watch as the numbers of high school graduates interested in attending fall away.

As I write, the Northeast is hunkering down for the arrival of Hurricane Irene.  People are tightening things up, battening down the hatches, and stocking up on the essentials. Maybe Irene will prove only to be an inconvenience, but it is a good idea to get ready anyway.

This article originally appeared on August 26 in the Chronicle of Higher Education's Innovations blog.

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