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March 19, 2012

It Is the Value Proposition, Not Costs, That Should Drive the Higher Education Debate

Across the nation, legislators are asking questions about the costs of higher education, which is a bit like asking which blade of scissors cuts paper. What really matters isn’t how much something costs, but how those costs are balanced with benefits—the value. This is a harder question, but one that needs the asking.

This discussion is more than just a hangover from the recession, but the data is unclear about how real the problem is. While college tuition has risen over the last two decades, state funding for universities has declined. At some schools, per-student spending has dropped, at others it has risen; but nationwide only about 10 percent of tuition increases in the recent decade are due to higher spending on each student. The biggest factor in higher tuition is the declining state support, or shifting the cost from taxpayers to college students.

Nationally the share of expenses allocated to teaching, administration and student services has been largely unchanged for two decades. Even so, some funds diverted from the classroom might actually improve educational efficiency. Computer purchases are one example; another is Ivy Tech’s recent effort to hire more student counselors to improve graduation rates. This is a non-instructional cost, one that I’d wager increases value for students but is likely punished by Indiana’s erratic funding formula. In the end, even with higher tuition, college students are still flocking to campus. The real problem isn’t increasing costs, but uncertain benefits.

For the typical student, the college experience is an investment windfall. The return on a college degree continues to outperform any other investment. However, for a growing number of students, education doesn’t pay. Today, about 1 in 5 graduates hold jobs that didn’t require a degree a generation ago. This phenomenon predates the recession. Certainly, some of these changes are due to changing technology requiring more skills in particular occupations, but much is simply due more students choosing majors with little or no demand. It is these students, and probably their disappointed parents, who cry loudest about the cost of education and heavy college debt. Colleges should be a bit clearer about career opportunities, but, really, this information is less difficult and costly to obtain than an iTunes account. Moreover, any visit to an Occupy encampment will provide examples aplenty (an underemployed puppetry major is my personal favorite—no kidding).

The U.S. now graduates more visual and performing artists each year than we do engineers or scientists. I don’t mean to disparage the arts or even discourage these choices. I simply note that this trend factors into the value proposition of college.  

What then should we do? The best students in any major always do well, but even good students in many majors have dim career paths. Ironically, cutting the costs of college will simply magnify this problem. Imagine how many puppetry majors we’d have if college were free! The problem isn’t cost alone, but the value of a college education. That is the real policy issue we aren’t yet talking about.

Link to this commentary: https://commentaries.cberdata.org/615/it-is-the-value-proposition-not-costs-that-should-drive-the-higher-education-debate

Tags: value, education, education


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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