Returns to College Are Poor for Marginal Students

The Economist finds 26.5m workers in America—two-thirds of those with degrees—are doing work that was mostly done by non-graduates a half-century ago.

The Economist Reports:

In the OECD… 43% of 25- to 34-year-olds…have degrees. In America…48%.

Since 1990 fees for American students who do not get scholarships…have risen twice as fast as overall inflation.

Comparisons between countries provide little evidence … that sending more young people to university will boost economic growth and social mobility.

Research by the New York Federal Reserve shows that the return on investment in higher education soared between 1980 and 2000 in America, before levelling off at around 15% a year.

What fewer realise is that the graduate premium overstates the financial benefit…if their school grades barely qualify them for entry, no matter what they study. … In America 40% of college students fail to graduate with four-year degrees within six years of enrolling. … Including dropouts when calculating the returns …  Bryan Caplan of George Mason University [link to my prior post] argues that … the return on a four-year degree in America ranges from 6.5% for excellent students to just 1% for the weakest ones.

As degrees have become more common, their importance as signalling devices is rising. … Degrees are in part… a “positional good” that benefits one person at the expense of another. … A complete calculation would include not just gains to graduates, but losses to non-graduates. 

The Economist [finds] 26.5m workers in America—two-thirds of those with degrees—are doing work that was mostly done by non-graduates a half-century ago. … We find only a weak link between higher shares of graduates in an occupation and higher salaries.

Andreas Schleicher, the head of education research at the OECD, reckons that “countries have skills shortages, not degree shortages.”

 These findings are consistent with the arguments I make in my book The Upside of Inequality about the true costs and benefits of tertiary education and the shortage of properly trained talent despite an increase in the share of college degrees (pages 169-174). Similar arguments are made by George Mason economist Bryan Caplan, which you can read here.