Yesterday the American Moustache Institute announced plans for the “Million Moustache March,” the objective of which is to encourage men to grow moustaches. It’s all about economics, they say.
According to AMI research, mustached Americans earn 4.3 percent more money than “clean-shaven Americans” on average per year. Therefore incentivising mustache growth would boost the economy.
It was a slow news day and this one got some play. Of course, the idea that you can grow the economy by growing a moustache is silly. And while the correlation between moustaches and earning power may well be genuine, it’s more likely coincidence than causality. No reasonable person really believes that not shaving will get them a 4% raise, or a job that pays more.
But over the last seventy years, the U.S. government has pushed the same silly idea, and the education industry has taken that argument and turned it into an insanely successful marketing ploy.
It’s a deceit that’s bad for those taken in by it and bad for America.
Here’s the basic argument: People with higher degrees have higher earnings and lower unemployment than those without degrees. The graphic below, complete with 20 point header, comes directly from a U.S. government website.
It’s a fabulous marketing campaign. Unfortunately it’s lead to some disastrous results. And it’s not exactly true.
How We Got Here
Until WWII, it was not particularly easy to go to college. In 1939, 186,500 people graduated from college with bachelor’s degrees. In 1949-50, that number had doubled to 432,558. While part of that was due to population growth, more of it was due to the G.I. Bill, which made college affordable for thousands of people for whom it would not have been affordable before. For politicians, the G.I. Bill served multiple purposes: It recognized and rewarded servicemen for their contribution while avoiding the challenge of instantly conjuring up hundreds of thousands of peacetime jobs. In effect, it used college as a holding bin so it could drip feed discharged soldiers back into the workforce.
The number of graduates stayed relatively stable until the early sixties. In the sixties, the number of people with bachelor’s degrees effectively doubled again. Again it was less about population increases than it was about a government program that made college more affordable to more people. In 1965, congress passed HEA, the forerunner of what are now Pell Grants. In this case, the objectives were more focused. The idea was to help poor and lower middle income students who might otherwise not have access to higher education get degrees so that they could earn more and move up. In short, it took the graphic above and created a program to turn it into reality for poor kids. It worked.
Over the last forty years, the government has continued to introduce more and more programs to help people go to college. And the relationship illustrated in the graphic between educational attainment and income became further cemented as employers began requiring degrees for even the most basic jobs.
Unfortunately, as in the case with most things that work, from banking deregulation to Fannie Mae, the problem with successful programs that work is they get extended to the point where they don’t work any more.
The Hole in the Argument
In the fifties, the relationship illustrated in the graphic was certainly true: More education, more income. Or more income, more education. It was probably a mix of both. Until education became widely accessible with the help of the government, only the rich and the very smart got degrees. Being real, real smart and starting out rich certainly gives you a leg up when it comes to earning more than the Average Joe.
But does it hold now? Probably to a degree, but not to the degree illustrated by the chart, and even more importantly: It’s not likely to hold in the future for three reasons.
- The first is: Not all graduates are created equal. As more and more people go to college, the talent pool is watered down, and people of less talent have degrees. While average people with superior education may well be better employees than average people without education, the question is “How much better?” Likely not as much as is shown in the graph.
- The second is: Not all degrees are created equal. A typical engineer makes $75,500 per year, and a social worker $43,180. Graduate more social workers and fewer engineers and that advantage begins to evaporate, and that’s exactly what’s happening. In 1966, 35% of all degrees granted were science and engineering. In 2008, that was 31%.
In truth, although this is just anecdotal, it’s probably worse than that as degrees-for-dummies programs and degrees proliferate and universities teaching junk science and history proliferate.
- The third is that the cost of getting that degree has risen tremendously. According to the Delta Project, college tuitions have increased over 300% since 1988, and that’s accounting for inflation. Other costs associated with college, including housing, food, and books, have also jumped. In overly simplistic terms, that means that it will take a social worker twenty years to pay off the cost of that investment in education.
But, my academic friends will howl, that ignores the intrinsic value of education, which is priceless, blah, blah. That’s fair. Tedious, but fair. There is an intrinsic value to knowing stuff. The issue here is truth in advertising. If my hypothetical social worker wants to go into twenty years of hock to take a course in Opera Appreciation, then I am all for it. Just don’t promise him it’s a can’t miss investment opportunity. Because a course in Opera Appreciation probably doesn’t pay in economic terms.
So What’s the Problem?
This over-marketing of education has led to some very bad results. There’s the debt mountain incurred by young graduates who have been gouged by avaricious universities. There’s a glut of advanced degrees, which has led to increased used of cheaper adjuncts to teach courses. There’s an overall devaluation of degrees as they become less exclusive.
And it has turned universities from educational institutions into untaxed profiteers. Indiana University is now the largest employer in the state of Indiana. And like many other universities, it’s had to get creative to find places to stash all that cash. Yes, it’s taken the same route as fat and happy corporations and expanded into adjacent industries, like research-for-hire and healthcare. It’s spent a fortune on its athletics teams—the typical Big Ten team spends $115,000 per athlete on coach’s salaries, etc. That’s seven times what is spent on a non-athlete student. And it’s built every building it can think of, and has still got a mountain of cash left over. IU has an endowment of over a billion dollars, like 28 other universities and colleges in the U.S.
Even worse, in the heady rush of being head of a major conglomerate and de facto owner of a valuable sports franchise, its leadership has arguably lost focus on what it is supposed to be doing in the first place. In a recent article in the Herald Times, IU president Michael McRobbie boasted that IU was spectacular for the state of Indiana, generating $25 of economic activity for every dollar of state investment, “That’s the kind of return investors could only dream of achieving in the stock market.” Forget for a moment that the comparison is gibberish in financial terms and ask yourself, “Really? That’s the measure of success for a university? Economic return?”
Anyway, of course the returns are great. Just like the bankers who profited from the government underwriting the housing market, so have universities profited from the government underwriting the education market. In fact, over the last twenty years we’ve seen a huge expansion of for-profit education, attracted by the potential for return. Indeed, not-for-profit universities have had it even better, because they face few competitive pressures on pricing (allowing them to gouge) and don’t pay taxes.
What’s the Solution?
It’s time for federal government to step back from the education loan business. Government loan programs have brought millions of lower income people into the middle class. They have primed the pump. Well done. Now it’s time to cut back loan programs–not eliminate them, but focus them on the best and the brightest lower income kids. Just like the government needs to get out of the housing loan market (or at least reduce its role,) it needs to get out of the education loan market.
There will be pain involved. Fewer kids will go to college. The number of colleges and universities will shrink. Heaven forbid, but without subsidies from other areas, football coaches may have to eke by on $2 million salaries and fly commercial. Colleges will be forced to become more efficient rather than just ratcheting up tuition to cover expenses. Employers will be forced to actually interview applicants rather than using bots to sort resumes. Some kids who never should have gone to college in the first place won’t get to go, and a few who should have, sadly will miss out.
But there will be a good result as well. Fewer kids will graduate with unusable sports marketing or fine arts degrees and $150K worth of debt. Colleges will become more focused and efficient. Admissions counselors will be able to show that graphic above to prospective students and know that they are selling truth, not bunkum.