Over spring break, I read a Bryan Caplan’s very popular book, The Case Against Higher Education. Many readers of this column might suppose I’d like this book. I tend to support smaller government, and am a frequent critic of higher education. Recall that I’m the professor who thinks tenure is mostly counterproductive to good research and teaching. While I’d strongly recommend this excellent book, the central policy prescriptions are mistaken. Worse still, they are unwisely becoming a faddish part of the education debate. Let me explain.
Caplan argues that the value of a college degree is split between actual learning and signaling to employers that you are conscientious and intelligent. He makes a very compelling case, concluding that 80 percent of the wage benefit of a college education is signaling, and 20 percent actual learning. While several reviewers have tried to poke holes in his analysis, I will not. Because even if he is right, his policy prescription of eliminating public support of higher education is deeply mistaken. Here’s why.
If the learning that results a college degree is only worth one-fifth of its total value, it is still by far the best public investments most state or local governments make. For example, the annual income gains of higher education that Caplan uses result in more than one million dollars of lifetime earnings. Here in Indiana, a college graduate earns about $30,000 more per year than a high school graduate. If only 20 percent of that is due to actual learning, the result is $6,000 per year in income. There are many other benefits as well, but on this one alone no other government program or spending priority comes even close.
While this is partly due to the generally poor benefits of much government intervention, it is worth restating that if only 20 percent of the gains of higher education are due to actual learning or acquired skills, it remains perhaps the premier public investment of our times. Economists have done a fine job of accounting for program benefits. The following is a partial list of public spending that using Caplan’s own figures are less economically beneficial than higher education; all transportation, including roads, rail and air, all workforce and economic development, public health, drug abuse and prevention, fire protection, parks and public lands, environmental regulation, occupational licensing and child protective services.
I think the best evidence is that after spending on basic crime prevention and pre-K-12 schooling, nothing is as important to a state’s economy as higher education. Now, there are lots of spending priorities that are more politically popular. For example, workforce development is in vogue right now, but the overwhelming evidence from decades of research is that spending on workforce training yields no net benefit. Popular yes, effective no.
The causal effect of education on wages is clear. It is no accident that Indiana ranks 39th in income and 42nd in educational attainment. Our income ranking is now converging on our educational ranking. Those outcomes are a conscious policy choice to underemphasize higher education and to shift away from the aspirational goals that former Governor Mitch Daniels set than a decade ago.
There are some important lessons to be gleaned from Caplan’s book. Indiana colleges should be more rigorous and ask more of students. We must be clearer about career prospects, though that probably doesn’t mean what most readers suspect. A good liberal arts education is worth a lot more than a weak professional degree. We should probably limit federal loans to tuition to end the runaway spending on college amenities.
I also think public colleges have a duty to contribute research towards the public good, focused as close to home as possible. Public universities also have a goal of expanding opportunity. I shudder to note that the bottom 25 percent of students academically, who are in the top income quartile, attend college at the same rate as the top 25 percent of kids in the bottom income quartile. Far too few high school graduates go to college, especially poorer ones and in Indiana the problem is chronic. Indiana likely needs to send 10,000 more kids to college each year and graduate more than half of them for the rest of this century.
A degree of frankness is in order. My oldest son graduates from an Indiana high school this year and is headed to college. About half of all his classmates will still be working in 2075, and fully one in five Hoosiers born this year will still be employed when this century ends. Our state is near the bottom in educational attainment, and slipping both in our income and in educational rankings. If, in this century, we want Indiana to match the national average in personal income and educational attainment, the time to act is now.
About the Author
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