Pew Researchers analyzed the ROI of higher education using Census data (the American Community Survey (ACS)) and cost data (National Center for Education Statistics (NCES)) and published their findings in a piece titled, “Is College Worth It?” (chapter 5, The Monetary Value of a College Education).
On the ROI of a four-year college degree, it states:
[T]he analysis finds that the typical or average high school graduate with no further education earns about $770,000 over a 40-year work life. The typical worker with a (two-year) associate degree earns about $1.0 million, and the typical worker with a bachelor’s degree and no advanced degree earns about $1.4 million.
[T]he monetary return to college is influenced by a variety of factors, including type of college attended and major field of study … [W]ork-life earnings tend to be much higher for undergraduate majors requiring numerical competencies (computers and engineering) than other fields of study (education and liberal arts). In regard to costs, some colleges and universities have much higher tuition and fees than the typical in-state public institution.
Here’s its 2009 “Mean Earnings by Age”:
The Pew Research estimates for work-life earnings are based on the current patterns of earnings differences by education in the most recent census data … Many economists would surmise that the future course of the financial returns to schooling in part depends on how many young people pursue and complete college. If college-educated workers become relatively less scarce, the financial returns to college might decline.
We’ll return to this degree supply problem very shortly.
To the Pew researchers, college educations are like magic mushrooms for Mario. By their very nature they make you bigger and insure you against injury; therefore, eat them as quickly as possible to ensure maximum benefit. The “power-up” perspective is internally and externally valid, but its causal arrows are wrong. Nothing inherent to college education makes people better workers, unless they’re gaining substantive knowledge both unlearnable on the job and not taught in high school, such as international relations theory for state department officials.
As Richard Vedder puts it, in “From Wall Street to Wal-Mart: Why College Graduates Are Not Getting Good Jobs,” the higher ROI of college degrees over high school degrees isn’t from increasing demand for college-educated workers; it’s from increased supply:
It is our view that the problem is NOT that employers are demanding more education, but rather that educators and public policy makers are producing more degrees, giving employers a large pool of applicants, and demands for the higher credential (e.g., bachelor’s degree) are instituted to narrow the applicant pool to a manageable size. Other things equal, on average, college graduates are somewhat smarter, more disciplined, and perform better academically than non-graduates. The probability that a prospective employee will be successful vocationally is traditionally enhanced by obtaining a degree—independent of whether the individual “learned” much while in college. This is a classic example of what the French economist Jean Baptiste Say said over two centuries ago: supply creates its own demand (Say’s Law). (9)
Memo to Mario: the mushroom doesn’t make you bigger; it’s just an indicator that you’re bigger than anyone who didn’t eat it. Additionally, Vedder claims the Bureau of Labor Statistics informs us that one-third of college graduates are working jobs that don’t require them. The Pew’s “power-up” perspective of higher education concedes that bachelor’s degrees aren’t priced to reflect their labor market value:
The typical worker with a bachelor’s degree in a liberal arts field and no advanced degree earns an additional $0.48 million over 40 years compared with a high school graduate who has no further formal education. Unless the degree is obtained at a very expensive college and university and no grant aid is received, it is highly likely that the added earnings will exceed the costs by a comfortable margin.
Thus, unlike Vedder who sees the problem in terms of excessive government support for higher education, Pew sees it as a marginal problem: Some colleges are overcharging some people, but that’s bad pricing on colleges’ parts and bad buying on students’ parts. It doesn’t falsify the idea that college education is inherently worthwhile, so provided people don’t overpay for their degrees, they’ll earn an extra $480,000 by reading the Theaetetus because doing so magically makes them more productive workers. I feel it was worthwhile for me personally, but I can’t speak for anyone else who sat through my senior Plato seminar. Nor can I say that the value of my philosophy degree is helped by the presence of those held by people who read the later dialogues, didn’t understand them, didn’t enjoy them, and couldn’t find work because there’s an oversupply of non-technical bachelor’s degree-holders. (Fret not; I was able to put my East Asian Languages and Cultures degree to use straight after college. Take that, humanities bashers!)
When discussing professional degrees, the Pew resurrects the law degree bottleneck argument. If college degrees are Mario’s mushrooms, juris doctors are Yoshi:
Law Degrees. Law degrees (J.D. or LL.B.) are far and away the most popular professional degree conferred, and work-life earnings estimates suggest that they have a sizable earnings benefit relative to the costs of acquiring the law degree. Consider a young person with a bachelor’s degree with an undergraduate major field of study in social science/law. The NCES tuition figures indicate that the out-of-pocket cost of three years of law school after aid will average about $75,000. Again, foregone earnings trump this, as a worker with a bachelor’s degree in social science/law will forego about $32,000 per year (or a total of $96,000) to pursue law school. The added work-life earnings gains from having a law degree likely exceed the $170,000 costs by several-fold. The 2009 ACS does not allow us to estimate the work-life earnings of workers with a law degree. The work-life earnings of workers with professional degrees are $2.6 million, far in excess of the $1.4 million work-life earnings of a worker with a bachelor’s degree in social science/law. The $2.6 million figure of professional degree holders might overestimate what a worker with a law degree will make over a 40-year work life, because it includes the earnings of workers with medical degrees (at the same time, the $2.6 million figure also includes the earnings of religious workers with theology degrees). But a reasonable expectation is that the added increment to work-life earnings from having a law degree far exceeds the $170,000 cost of acquiring it. (Chapter 5) [Emphasis LSTB]
Of course, if you tell this to a law school dean, he’ll jab a finger in your face and snarl that people shouldn’t go to law school just for the money. Greedy 0Ls! Harrumph! (But the bottleneck argument is valid; get good grades; borrow responsibly.)
Does three years of law school cost $25,000 per year on average (if we pretended that tuition never increased (*HA*!))? In the 2007-2008 school year (which the NCES used) it kinda did … if you brute force average all the law schools’ tuitions, including resident and non-resident public school tuition. According to the LSAC, here’s enrollment and average tuition data from 2008-2009, and my research on 2009-2010 thrown in for fun:
|Type||2008-2009 Enrollment||2008-2009 Tuition||2009-2010 Tuition|
|Non-Resident Public (80)||48,465||$30,413||$32,710|
|Resident Public (80)||$18,472||$19,580|
So actually, two-thirds of all law students pay north of $35,000 per year for their law degrees, on average, though in the Pew’s favor, the opportunity cost of a law degree is negligible in a recessed economy. However, its own tuition chart suggests calling the JD’s value into question. It lists law school as a third more expensive than its next nearest peer, medical school.
The “reasonable expectation” of recouping the $100,000+ tuition and living expenses—which excludes interest on the student loans necessary to purchase the degree and uses an irresponsibly low discount rate of 4%—is not substantiated by the Bureau of Labor Statistics.
Job prospects. Competition for job openings should continue to be keen because of the large number of students graduating from law school each year. Graduates with superior academic records from highly regarded law schools will have the best job opportunities. Perhaps as a result of competition for attorney positions, lawyers are increasingly finding work in less traditional areas for which legal training is an asset, but not normally a requirement—for example, administrative, managerial, and business positions in banks, insurance firms, real estate companies, government agencies, and other organizations. Employment opportunities are expected to continue to arise in these organizations at a growing rate.
As in the past, some graduates may have to accept positions outside of their field of interest or for which they feel overqualified.
Feel overqualified? Or are overqualified? I think the BLS is being generous here, and the versatile juris doctor argument speaks more to Vedder’s invocation of Say’s Law and attorney overproduction than a reason to go to law school. In the past, I calculated that more than 40% of America’s ABA JD-holders were not employed as attorneys or judges in 2008. That doesn’t mean they’re underemployed (legislators, government officials, businesspeople, etc.), but a high non-lawyer rate suggests that the degree doesn’t contribute to higher work-life earnings than a bachelors degree ($1.2 million according to Pew).
Since Pew brought up medical degrees, let’s look at doctors’ contribution to the $2.6 million professional degree work-life earnings:
Job prospects. Opportunities for individuals interested in becoming physicians and surgeons are expected to be very good. In addition to job openings from employment growth, openings will result from the need to replace the relatively high number of physicians and surgeons expected to retire over the 2008-18 decade.
Job prospects should be particularly good for physicians willing to practice in rural and low-income areas because these medically underserved areas typically have difficulty attracting these workers. Job prospects will also be especially good for physicians in specialties that afflict the rapidly growing elderly population. Examples of such specialties are cardiology and radiology because the risks for heart disease and cancer increase as people age.
Job prospects should be good, because younger dentists will be able to take over the work of older dentists who retire or cut back on hours, as well as provide dental services to accommodate the growing demand.
Job prospects. Excellent job opportunities are expected over the next decade because there are only 19 schools of optometry in the United States, resulting in a limited number of graduates—about 1,200—each year. This number is not expected to keep pace with demand. However, admission to optometry school is competitive.
Job prospects. Excellent job opportunities are expected because there are only 28 accredited schools of veterinary medicine in the United States, resulting in a limited number of graduates—about 2,500—each year. However, admission to veterinary school is competitive.
This isn’t a fair sample of all the professions on my part, but you get the idea: In no way should prospective law students expect to earn anywhere near $2.6 million over forty years like doctors do. The wage premium for lawyers might exist for people who went to college for dirt cheap, gain substantial experience in the legal field, and get a free ride to a highly regarded law school. But even people in that advantageous position will lose nothing if they wait for the law school bubble to pop before going.
I credit Pew with pointing out that much of the “college premium” a bachelor’s degree provides over a high school education has increased due to the depreciation of high school educations. That, however, does not imply increased demand for college-educated workers. Rather, it reflects increasing income inequality, the overvalued dollar wrecking the U.S. export market, and “free trade” policies that haven’t resulted in corporate boards of directors being replaced with their cheaper Japanese equivalents.
I’m not nearly the methods grandmaster I wish I were, and I don’t doubt the authors of the Pew Research Center study calculated everything right, but they didn’t falsify Vedder’s accusations of credential inflation, and they deserve admonishment for overvaluing law degrees.