Stop The Presses! College Graduates Earn More

According to a new European study from the OECD, the college pay premium — the gap between the lifetime earnings of high school grads compared to college grads — is higher in the U.S. than in any developed nation. A U.S. male graduate will earn over $360,000 in a lifetime compared to a high school graduate: a female much lower, $229,000. (The premium is also caused by high school graduates in the U.S. being less unionized.)

The OECD authors draw the conclusion that more people should invest in college education.  But as Harvard economist Richard Freeman argued in The Overeducated American decades ago, such reasoning is a dog chasing it’s tale.

As soon as the value of high-school degrees degrade, and people can’t get another kind of skill certificate (see my previous post on what community colleges should be doing), more people will be wasting money on expensive college degrees just to signal a set of employable skills. Telling people to go to college to earn more is like telling people to stand up in the stadium so they can see the soccer game better: everyone stands and no one can see better.
 
David Leonhart from The New York Times, in a sharp attack on the business model of the modern University — get bodies in the door and put them in large lecture classes hoping some drop out before attending the smaller, and thus more expensive for the university, upper division courses — also urges more people to attend and finish college.

Leonhardt’s article is a review of a new book, Crossing the Finish Line, by two former college presidents (Princeton’s William Bowen and Maclaster’s Michael McPhearson) that revealed the amazing statistic that only half of the people enrolled in college finish. Don’t blame the students; it is the business model of our industry. The college premium creates the demand for college  enrollment and colleges are the big winners.