Almost all of the research in economics does suggest that higher education is very important for the growth of the economy. Returns on post-secondary education are in double digits, so it does make sense to tell high-school graduates to push on for another four years and perhaps beyond. It seems like a good investment to keep adding years of higher education.
The question now is what kind of higher education? Does everyone need to go to our traditional college setting, like a liberal arts campus and obtain a degree that promises not much but a wait in that profession?
In one of my econ classes, the question aroused, is it possible to over-invest in human capital? One example would be a Doctor of Philosophy driving a taxi in New York City. The answer is, for sure. Our current unemployment is beyond 8%, but the rate of under-employment (overqualified labor for their jobs) is at historic high as well. So, one might beg the question, why do so many students choose college degree?
I was appalled by Charles Murray television interviews related to his new book “Coming Apart: The State of White America, 1960-2010,” and the state of the overall education in our country. According to Murray, degrees like BA are worthless. Perhaps they have some signaling effect, but unless the employers spent a large amount of time on training these graduates, they are not ready for the tasks. Then I read Alex Tabarrok’s article in The Lighthouse from 3/6/12 about the rate of college dropouts (around 40%) and how Europeans have a much better system at filtering higher-level education participants.
The United States economy is moving toward high-tech, high-skilled labor and demand for this labor will come from majors like natural sciences. If that is the case, Mr Tabarrok is asking wisely, why are we equally subsidizing higher education for chemistry majors and English majors?
Not long ago, there were a handful of schools offering the MBA degree. It was highly selective and graduating students were able to obtain highly paid jobs. Well, today, almost any college offering an undergraduate curriculum also offers the MBA program. Many of them have very light entry requirements and no specific focus. In essence, you graduate knowing a lot of nothing! Yet students are charged high tuition and graduate expecting better jobs, bigger promotions, etc…
Perhaps we are going back to the fact that all these programs (undergraduate and graduate) provide a certain niche and thus some monopoly power to this overwhelming number of institutions of higher learning. These programs attract more students and thus more funds. But what about later, once these graduates receive their diploma? Several of our business students obtain jobs basically working as sales-people making phone calls. Do you really need a four year degree for that?
Solutions
Well, Tabarrok explains the German model, where only a few students (relatively speaking) end up in universities, while many others go to technical schools where they directly learn the demands of their respective market place. In this country I see that with Law and Medicine, where entry is very difficult and thus only a few get in. Making entry almost free will have its consequences, mainly with the high drop-out rates and poor job placements.
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