June 24, 2018 by Philip Lewenstein

Rethinking the Value of Higher Education: It Is Still Worth It, and It Matters

May is the most beautiful time of the year, with buds of our big front-yard apple tree exploding into wondrous white blossoms and the lilacs on the side of the house peaking in purple with their sweet scent. The reawakening of trees and flowers forms a colorful backdrop for celebrations of graduates and mothers.

On May 12, our family beamed with pride as our youngest daughter participated in the University of Minnesota Law School’s 130^th commencement ceremony at Northrop Auditorium. It is the seventh college degree earned by our three daughters and son—four bachelor’s, two master’s, and a juris doctorate.

Three years ago, I wrote about the youngest daughter’s baccalaureate commencement near Boston (“Pride, Gratitude, and Hope in Higher Education”). I expressed gratitude for the broad access to a diverse array of higher-education opportunities available in the United States supported by public and private investments. Yet I also noted prevailing questions in the media and elsewhere about whether higher education is worth the investment and whether it matters.

Now, I continue to reflect on the value of higher education. While acknowledging the benefits, including the wage premium of a college degree, critics question the value in view of the large family investment required, burgeoning student debt, foregone earnings, and shortage of employment opportunities commensurate with the level of education completed.

Assessing the value depends on how the issue is framed. Should the worth of the degree be defined as its value in lifetime earnings? Or should the worth of a degree be evaluated in terms of individual knowledge, contributions to the economy, or progress toward advancing equality? Because of the growth of credentialism, does the absence of a degree penalize those who lack it?

As the parent of three college-educated daughters, I paused recently while reading an essay by Nancy Niemi of Yale University on the devaluation of a higher-education degree for females. Niemi writes about college credentials and their diminishing utility in creating political, economic, and social power for women and men in the United States. Niemi contends that credentials offer increasingly lesser advantages to individuals—particularly women—who do not have other means to shape the circumstances of their lives.

A common perception is that individuals with higher education levels earn more, pay more taxes, and are more likely than others to be employed and to have job benefits such as retirement and health insurance. Adults with more education are more likely to move up the socioeconomic ladder and less likely to rely on public assistance, according to the Education Pays reports by the College Board, a nonprofit organization devoted to expanding access to higher education.

The report, Education Pays 2016: The Benefits of Higher Education for Individuals and Society, updated triennially, documents differences in the earnings and employment patterns of U.S. adults with different levels of education. The report establishes a correlation between education and health outcomes, community involvement, and indicators of the well-being of the next generation. The 2016 report also includes data on variation in earnings by different characteristics such as gender, race/ethnicity, occupation, college major, and institutional sector.

Jennifer Ma of the College Board and a report coauthor says, “A college education is an investment that pays dividends over the course of lifetime—even for students who accumulate some debt to obtain a degree.”

New Georgetown University research (Five Rules of the College and Career Game, May 2018) reaffirms that more education is usually better. Median earnings increase with each additional level of educational attainment. The median earnings of a high-school diploma holder are $36,000 while a bachelor of arts holder makes $62,000 and a graduate-degree holder earns $80,000, on average, according to the report prepared by the Georgetown University Center on Education and the Workforce.

However, college is less about what college one attends and what degree one earns but more about the returns of individual college programs, the report says. Since the 1980s, 60 to 70 percent of the increase in earnings inequality has been due to differences in access to college programs with labor-market value. For example, a bachelor’s degree in architecture and engineering leads to a median annual earnings of $85,000, almost double the median annual earnings of education majors of $46,000, the report notes.

Jamie P. Merisotis, president and CEO of the Lumina Foundation, says that the skills gap is real, and a high-school diploma—for decades the ticket to a steady job and a middle-class lifestyle—just doesn’t cut it these days. The Lumina Foundation is the nation’s largest private foundation focused solely on increasing Ameriicans’ success in higher education.

“And let’s face it,” he says. “It never will again. Advanced robotics, artificial intelligence, big-data analytics, instantaneous global communication—all these advances plus cultural and technological innovations we can now only dream of, make higher-level earning an absolute necessity.

“Simply put, the road to economic success and security now merely begins with high-school graduation. Economists tell us that more than 95 percent of the jobs created since the recession ended in 2011 have gone to those who have earned a credential beyond the high-school diploma.”

A key aspect in the discussion of the value of college is whether college pays off for the poor.

Two who have studied this issue are Tim Bartik and Brad Hershbein, senior economist and economist, respectively, at the W.E. Upjohn Institute for Employment Research, a nonpartisan, nonprofit research organization in Kalamazoo, Michigan.

Bartik and Hershbein argue that college pays off for the poor but college by itself cannot fix income inequality and that other policies are needed (“College Does Help the Poor,” the New York Times, May 23, 2018). Based on their research, they find that people from low-income backgrounds who complete college, compared to those who complete only high school, increase their career earnings by 71 percent. The premium of a college education for graduates from low-income backgrounds exceeds tuition costs and any foregone earnings from attending college instead of immediately working full time after high school.

However, Bartik and Hershbein explain that the evidence shows college is only part of the solution to inequality. “Obtaining a four-year college degree does not equalize the lifetime earnings of people from different economic backgrounds,” they say. “College graduates from low-income backgrounds earn far less than college graduates from higher-income backgrounds. Furthermore, both the dollar and percentage boost to college is much greater for those from higher-income families.”

Despite widespread belief that college degrees pay off, several experts question that perception. Richard Vedder, director of the Center for College Affordability and Productivity and teacher at Ohio University, and Justin Strehle, who studies economics, argue that the cost of attendance is rising while the financial benefits of a degree are falling (“The Diminishing Return of a College Degree,” June 5, 2017, Wall Street Journal).

The earnings advantage associated with a bachelor’s degree compared with a high-school diploma is no longer growing like it once did. Since 2000, the benefits have declined while costs have continued to rise, Vedder and Strehle note. Rising costs and declining benefits mean the rate of return on a college investment is starting to fall for many Americans. Thus, it might be better for more students to forego college and pursue less expensive postsecondary training in vocations like welding or plumbing.

Vedder and Strehle explain that the payoff from a college education varies sharply depending on school and major, and the size of the college earnings premium also varies with race and gender. College graduates traditionally earn more than high-school graduates in part because their degrees act as signaling devices in the job market. For employers, candidates with a bachelor’s degree seem brighter and more disciplined, ambitious, and reliable than graduates with only a high-school diploma. But now, the bachelor’s degree is not the reliable signaling device it once was because of underemployment among college graduates. 

In The Case of Education: Why the Education System is a Waste of Time and Money, Bryan Caplan, professor of economics at George Washington University, says that despite being popular and lucrative, education is greatly overrated. Caplan argues that the main function of education is not to enhance students’ skills but to certify their intelligence, work ethic, and conformity—to signal the qualities of a good employee. Decades of growing access to education have not resulted in better jobs for the average worker but instead a runaway credential inflation, with employers rewarding workers for costly education they rarely, if ever, use.

Caplan asserts that the labor market values grades over knowledge. The advantage of having a credential, he says, comes at the expense of those who lack it, resulting in “credential inflation.” A college degree is a prerequisite for jobs that previously did not require one. In an April 2018 Wall Street Journal interview (“School is Expensive. Is It Worth It?”), Caplan explains that signals weaken as they become widely diffused. He says that studies confirm the suspicion that higher education is not as rigorous as it once was.

Because the benefits of education flow to those who were well off to start, the system promotes inequality without creating much wealth, Caplan says. He estimates that about 80 percent of the education premium comes from signaling, 20 percent from marketable skills. Given his case against education, Caplan supports education austerity, cuts in government funding to curb the rat race, and more vocational education because of the value of practical skills.

In a May 16 New York Times Op Ed. (“College May Not Be Worth It Anymore”), Ellen Ruppel Shell, a Boston University journalism professor, notes that young people and their families go into debt because they believe that college will help them in the job market—and it does on average. But, Shell raises a question: “Does higher education itself offer the benefit, or are the people who earn bachelor’s degrees already positioned to get higher-paying jobs?”

If future income were determined mainly by how much education people received, then one would assume some higher education would be better than none. But this often is not the case, she says.

Shell says that we appear to be approaching a time when, even for middle-class students, the economic benefit of a college degree will begin to dim. Since 2000, she says, the growth in wage gap between high-school and college graduates has slowed to a halt; 25 percent of college graduates now earn no more than does the average high-school graduate. She attributes this situation to oversupply. Technology increased the demand for educated workers, but that demand has been consistently outpaced by the number of people prepared to meet it, she says.

Citing information from the Bureau of Labor Statistics, Shell notes that less than 20 percent of American jobs require a bachelor’s degree; by 2026, the bureau estimates that this proportion will rise, but only to 20 percent. Employers demand a degree for jobs that don’t require them because they can, Shell states.

“What all this suggests is that the college-degree premium may really be a no-college-degree penalty,” she says. ”It’s not necessarily college that gives people the leverage to build a better working life; it’s that not having a degree decreases whatever leverage they might otherwise have.

“This distinction is more than semantic. It is key to understanding the growing chasm between educational attainment and life prospects. For most of us, it’s not our education that determines our employment trajectory but rather where that education positions us in relation to others.”

I have always valued higher education. However, with four female college graduates in the family (my wife and three daughters), I was taken aback when I read Niemi’s April 27 essay, “Why Does the Public Distrust Higher Ed? Too Many Women,” in the review section of the Chronicle of Higher Education.

Niemi states that despite the long-standing belief in the importance of higher education, there are signs of public distrust, or devaluation, of higher education. Among the reasons for the public distrust that few are talking about, she concludes, is the increased presence of women. “Now that women enroll, succeed, and in many cases, surpass men in attaining college degrees, the value of those degrees is diminishing,” she says.

Niemi is director of faculty teaching initiatives at Yale University’s Center for Teaching and Learning and the author of Degrees of Difference: Women, Men, and the Value of Higher Education (Routledge, 2017).

“Even though virtually every economic indicator points to the value of a college degree, as women and minorities—whose college attendance is also rising—continue to need credentials just to stay competitive, a growing number of men are looking elsewhere to regain their cultural and economic advantage,” Niemi says.

Niemi identifies three reasons for the devaluation of degrees: cultural anxiety about gender equity, the reality that having a college degree does not make up for other disadvantages, and Americans’ comfort with a two-track educational system in which all are theoretically welcomed, but not all are likely to succeed.

Women’s academic success does not seem to translate to equal pay or more positions of influence; the increase in women’s college numbers is not evidence of a decrease in gender bias, Niemi says. “While college-educated women have greater job prospects and earn better pay than women without college credentials, they are not equal to men—not men whose credentials match their own, nor by many measures, even men who have markedly fewer credentials and training.”

College women know that they are likely to make less money than their male classmates, and they are fairly certain that they will be penalized for having children, Niemi says.

“No matter what the degree, no matter how many degrees, and no matter how many more women than men have degrees, it appears that formal education credentials are becoming ‘something that women do.’ Ostensibly a place to gain knowledge, skills, perspectives, and connections, college may increasingly be seen as an extra requirement for women to obtain good jobs while men find other places to build economic and social power. The causal mechanisms for this devaluation are multiple and intersecting, but not new.

“Higher education may be on its way to becoming a redefined institution—one in which some women gain credentials to compete with men, but not much power to change the status that gender confers. Meanwhile, men have other places to go.”

Under this two-track educational system, new paths have been created for men to bypass higher education. Niemi highlights the ascendance of digital technology and rewards, the rise in value of postsecondary certificates, a resurgence of occupations like emergency medical technician and security guard that underscore stereotypical masculinity, and the creation of occupations that prize independence and keep distance from formal schooling.

In short, Niemi argues that the greatest underlying issue in higher education is that schooling is seriously flawed as a lever for social equity.

“Women’s overall enrollment and achievement in higher education notwithstanding, on virtually every major dimension of social status, financial well-being, and physical safety, women still fare worse than men because they have less power than men to control those aspects of their lives,” Niemi says.

Ascertaining the value, however defined, of a college degree appears more difficult than it was a few years ago. Overall, the benefits outweigh shortcomings even though the number of detractors and critics is growing. Benefits may be applied differentially based on race, ethnicity, gender, social, and economic status. The return on investment is not the same for all graduates, and benefits may be increasing at a slower rate than in the past. Despite significant increases in female enrollment and college completion, outcomes for women are less favorable than for men. The degree may not lead to social, political, and economic equity.

Higher education needs continuous change—improvements and reform. New ways of delivery and different types of degrees and certificates—perhaps more vocational and career focus—are needed in view of workforce, demographic, and technological trends. Individuals need to focus on determining and pursuing the educational opportunities that best match their goals and interests.

Despite a rethinking about the value of a college degree, I continue to believe that higher education is worth the investment, and it matters for both individuals and society. As I said three years ago, education continues to be our family’s leading value. Whether more education leads to fame or fortune, it provides the foundation for our ability to generate new ideas and knowledge, to think critically, to deal with change, to meet challenges, to overcome adversity, to appreciate diversity, and to support active, not passive, citizens and consumers.

Because higher education has value and matters more than ever, May will continue to be a beautiful time to celebrate the graduates.