Puzzling College Enrollment Rate

Greg Ip wrote, a while ago:

Washington Wire - WSJ.com: Portion of High-School Grads Heading to College Shrinks: A welcome surge in the share of high-school graduates going to college has come to a halt, at least for now. First, some background: College graduates earn more than high-school graduates, and that premium is a lot bigger than it was 20 years ago. There are numerous reasons but one might be that after rising for most of the postwar period, the share of the work force with college degrees stopped growing, constricting supply just as demand for highly skilled workers took off.

Earlier this decade, there were signs of a shift. Responding perhaps to both the college wage premium and the weak job market, the proportion of high-school students who enrolled in college the fall after they graduated rose from 61.7% in 2001 to 68.6% in 2005, the highest since data began in 1959. To be sure, many of those enrollees never finished college but on balance it suggested the supply of college graduates was about to head higher. But last fall, the college enrollment rate dropped back to 65.8%, the Bureau of Labor Statistics reported this week.

Exactly why is unclear. The tighter labor market ought to have encouraged some kids to take jobs instead of go to college. But the report showed just 46% of high-school graduates were working last fall, down from 49.3% the prior year. The proportion unemployed but looking for work rose to 13.7% from 11.4%, and the proportion neither working, looking for work nor in college also rose, to 12.3% from 9.9%...

It's not just that the college premium is bigger than it was a generation ago: it's roughly 90% compared to 30% a generation ago. A lot more people should be going to college, for any economist's definition of "should."

Comments

[Paul OBrien]

How does the wage premium for college educated persons compare to the rising costs of a bachelor's degree? One cannot look only at the wage premium as a motivator, one must also consider how long it will take to pay off the student loan debt.

[Ottnott]

The Contracts and Grants office at a typical U.C. campus advises that proposal budgets escalate future-year expenses as follows:

Staff salaries +3.5%/yr
Grad student researcher salary +2.0%/yr
Tuition and fees +6.0%/yr

Something has to give. Looks like it is college attendance, in many cases.

You also have to look at factors like Federal loan and grant programs for students, state funding for campuses (Calif. papers were reporting a couple years back that CSU campuses were so crowded that students were finding it impossible to enroll in enough courses in their major to graduate in 4 years), housing costs, and so on.

Oh, and the declining number of (relatively) high-paying blue-collar jobs that don't require college degrees.

The college/no-college pay differential has probably been growing much more rapidly than the ROI on a college degree.

[banana]

I blame videogames

[Bruce Wilder]

The out-of-pocket cost of going to college is staggering, and students graduate with substantial debt. Neither of those things were true in my day (early 1970's).

I suspect the return on investing in a degree from a mid-level college is not good, and the return on "some college" or a degree from a community college or some fourth-tier institution is downright lousy.

[wood turtle]

I would need a lot more numbers before I would be convinced of a college premium for everyone, regardless of degree. Are you including just those with 4 year degrees or including those people with higher degrees who may be making much higher salaries?

What are the starting salaries for various majors, and what is their salary 10-20 years down the road. Was it worth it to forego earning for four years and usually racking up a considerable amount of debt?

Yes, I also think the lack of good jobs for students with only high school degrees is a problem, but sometimes the reason for this is there are a lot of people with college degrees competing for the same jobs.

Also, I don't think you can continue with 5+% tuition increases each year when inflation is lower than that.

[bigTom]

Hasn't a big part of the increase in the return for a college degree really been an avoidance of the steep income drop for those without one?

And even there the reports are pretty depressing. It is claimed that todays 30somethings are making considerably less than their parents at the same age. The claim for median income of 30 somethings:
males - 12% less than their parents made.
families - 9% more.
So we need more two-income families just to get marginally ahead. How does this square with our supposedly great progress in productivity? Shouldn't greater productivity create higher wages?

I was wondering all this last Saturday. I happened to walk through a new business park. Rows and rows of financial services industry buildings (mostly mortgage lenders). So I think I know what is happening, the ever decreasing part of the work force that actualy creates end products is declining about as fast as productivity is going up!

[David]

Most colleges are becoming third-world trade schools

http://www.optimates.us/Greatbooks.htm

.

[Alex F]

Brad -- is it possible that the problem here is a distinction between averages and marginals?

That the average college student earns 90% more than the average high school graduate (or whatever) says nothing about the marginal student who might be deciding between taking a dead-end job versus going to a local community college.

What's the income gap between high school graduates and those with associates degrees, say?

[D-Slam]

This might be true in a US context, but not a Canadian context. Plenty of the people I know with undergraduate degrees wind up in McJobs, 25k in debt.... meanwhile, skilled tradespeople are in desperate, desperate shortage everywhere in the country and make more than most people with degrees. We need FEWER people in university, not more.

In Canada, anyway, advice for kids to "go to university" is not heard much anymore... as it is obviously absurd.

[me]

My wife's nephew graduate wiith engineering degree last December with top grades. No job yet.

If you take that differential and apply it to the cost of the education, the pay back isn't there anymore. Kids no longer make what their dads did in their 30s.

If it can be offshored and someone can put poison in for a shortcut you are screwed. Become a plumber.

[a]

Especially for an economist's "should"? More college students means more demand for professors in the Economics Department.

[centrist]

Dealing in "averages" is misleading. A few bankers with an mba can really skew the mean. What is the marginal return for the marginal student and how does that compare to the increasing costs of college which does not go down at the margin.

[J.Goodwin]

It's not just Canada. In Massachusetts, employers in a lot of key industries here are looking for people with associates degrees. They want people who have more than a high school education, who have something of a trade, and a transcript that indicates that they've been trained to use computers in some way.

Bachelors degrees are not necessary for the jobs that are currently being produced in the US economy, and the increasing number of graduates has helped the downward trend of labor costs.

[typekey pseudonym]

This no doubt due to the recent discussion of the possibility of higher marginal taxes at the top levels (see

http://www.american.com/archive/2007/may-june-magazine-contents/the-upside-of-income-inequality

and

http://www.tpmcafe.com/blog/coffeehouse/2007/may/29/a_truly_bizarre_argument_in_the_making)

[Lord]

That the top earners have a college degree is almost as indicative as being tall. It has little predictive power. It is not an education premium we are looking at but a large dispersion of incomes. You have to play the lottery to win, but that doesn't make your chances good.

[Slocum]

"Brad -- is it possible that the problem here is a distinction between averages and marginals?"

Yes, exactly. I could quite easily see a skilled trade being much more valuable, both in the short and long term, than a degree from a community college or 3rd tier state school.

And that's leaving aside the possibility that the tradesman may, in time, own a contracting business and become not just middle-class but quite wealthy.

[Ben]

What's mysterious? The Republican Congress cut student federal grants and hiked student loan interest rates by 40% in summer 2006. This was a simple market-driven response to that action.

[Xevious]

The 'dirty little secret' that perhaps hasn't shown up in the labor statistics or perhaps has and hasn't been adequately studied, is that the slice of the economy that has jobs that genuinely require a college degree has been expanding slower than the rate at which colleges in this country produce graduates.

I take the numbers that Brad quotes as a signal that the marketplace for potential college students is responding to this fact. Speaking in terms of return on investment, someone with average grades in high school, in the present economy, would probably be better off as an electrician or some other highly skilled trade. At least they won't be 25k in debt after 4 or 5 years and then have their job shipped off to Bangalore.

[Tom Fuller]

Don't forget those pesky numbers--

In the last 20 years of the twentieth century, the U.S. college-age population declined by more than 21%, from 21.6 million in 1980 to 17.0 million in 2000. The college-age population decline reversed itself in 2001, and will increase to 19.3 million by 2010 (a 13% increase over the year 2000 figure). Witty comment about how demography is destiny, please.