Credit: Florida State University

Is College Worth It? For Students and Society, the Answer is a Resounding Yes

How did the United States become the world’s preeminent economic power? It enjoyed many advantages at its founding, of course. Hard-working people, fertile farmland, abundant natural resources — all of which has contributed to American prosperity. Yet these advantages were soon augmented by a more critical factor: an exceptional education system that has powered our progress ever since.

Writing in their seminal work, The Race between Education and Technology, Harvard economists Claudia Goldin and Lawrence Katz chronicle how America’s peerless education system gave rise to its economic dominance. “That the twentieth century was both the American Century and the Human Capital Century is no accident,” they write. America’s human capital enabled its rise.

You can trace America’s ascendance through advancements in education. As our agrarian economy turned industrial, broad-based public investment in primary education was then supplemented with the development of universal high school. And crucially, citizens later won hard-fought battles to expand education access — not just to those who lacked financial means, but to those who had been historically denied access due to their gender or race. An educated citizenry emerged and a skilled workforce took shape.

The introduction of broadly accessible public higher education built on this progress. Even as the United States was convulsed by the Civil War, President Lincoln and other leaders prioritized the passage of the Morrill Land-Grant Act to lay the foundation for a more prosperous future. The law offered states federal resources to establish or expand public universities. And it transformed American higher education from a province of the privileged into a shared commitment to our future. The United States emerged as the world’s leading economic power less than a decade after President Lincoln signed the legislation into law.

Higher education should “be accessible to all, but especially to the [children] of toil.” — Senator Justin Morrill

Today, we’re undergoing another structural shift in our economy. The dawning of a knowledge-based economy has unlocked unprecedented opportunities. But those opportunities are accompanied by immense challenges. Technology has upended virtually every industry to varying degrees, sparking roiling dislocations for millions of American workers.

We have to adjust. The United States faces an array of interrelated economic challenges — from sluggish productivity gains to historically tepid wage increases to widening inequality. Tackling these challenges for the long haul will no doubt require multifaceted solutions. But they cannot be solved without robust investment in our nation’s citizenry and workforce. Unleashing Americans’ full potential will require cultivating their skills.

A college education is more important than ever. In a commencement address in 2016, then-Federal Reserve Chair Janet Yellen told graduates “economists are not certain about many things, but we are quite certain that a college diploma or an advanced degree is a key to economic success.” Chair Yellen said her primary concern is that those with lower levels of education would be left behind, which could render their skills less valuable or altogether obsolete.

The numbers are staggering. While just 48 percent of working-age Americans have some postsecondary credential, projections suggest 65 percent of all jobs in the American economy will require postsecondary education by next year. Since 2008, 96 percent of all new jobs have gone to individuals with at least some college education. And forecasts suggest the share of jobs requiring a college education will only rise further in decades to come.

Credit: Lumina Foundation

Unemployment data illustrates a similar divide. The most recent jobs report revealed the unemployment rate for college graduates is 2.1 percent, while the jobless rate for high school graduates is significantly higher at 3.5 percent. And college graduates were better insulated from job losses during the last recession and quicker to rejoin the job market if they left.

Then there’s the labor force participation rate, perhaps the starkest educational divide in our economy. The share of workers currently employed or actively seeking a job is 74 percent for those over the age of 25 who have a college degree, yet it’s just 58 percent for high school graduates the same age. Drawing idled workers off the sidelines and into the labor force would provide a significant boost to economic growth. But doing so will depend in no small part on workers retooling their skills, often at institutions of higher education.

That would also drive productivity gains. Thanks to the knowledge and skills they learn in college, graduates are more productive workers. A leading economist studying worker productivity at the Federal Reserve cites plateauing educational attainment as a significant factor behind our economy’s lackluster productivity growth. But college graduates aren’t just themselves more productive; research has shown they make the places they live and work more productive, too.

And higher productivity lifts wages. The typical bachelor’s degree holder earns $24,336 more annually than the typical high school graduate with no college education. Over a lifetime, this premium translates into an additional $1 million in earnings.

Investing in stocks has yielded an annual return of 7 percent since 1950. The return for a college degree today is about 15 percent. — Federal Reserve Bank of New York Research

Critics have long claimed this college earnings premium will diminish. As the supply of graduates increased, the argument went, the financial rewards for becoming a graduate would decrease. We’ve witnessed the opposite. In 1980, workers with a college degree earned 20 percent more than their peers without a degree. Today, the college earnings premium is at an all-time high — with graduates earning 80 percent more than workers whose highest degree is a high school diploma. As the economy’s demand for college-educated workers has multiplied, so has the college earnings premium.

But it’s not just the money, as University of Maine economist Philip Trostel has exhaustively shown. The Kauffman Foundation has reported a realignment in the composition of American entrepreneurs. Thirty years ago, a third of entrepreneurs’ highest degree was a high school diploma while a quarter of entrepreneurs were college-educated. That gap has now flipped. College graduates account for a third of American entrepreneurs, while individuals whose highest degree is a high school diploma account for just a quarter of all entrepreneurs. College-educated Americans are more likely to be entrepreneurs than their peers at any other level of educational attainment.

Credit: The College Board, Education Pays 2016

Taken together, these seismic shifts have produced a socioeconomic divide along educational attainment. Compared with individuals whose highest degree is a high school diploma, college graduates are 3 times less likely to be impoverished, 4.9 times less likely to be imprisoned and 3.9 times less likely to be a regular smoker. Those with bachelor’s degrees are also more than twice as likely to volunteer, 44 percent more likely to report being in good or excellent health and they donate 3.4 times as much to charity. What’s more, graduates are considerably more likely to vote and hold leadership positions in civic organizations. Life expectancy is an astonishing decade longer for college graduates at age 25.

To be sure, it’s hard to draw a direct causal link between a college education and some of these benefits. College graduates may live longer, for instance, in part because they have access to better health care. But even so, it’s safe to conclude that a college education and its attendant benefits play an important role in lifting a graduate’s economic fortunes — creating far-reaching effects that improve many other aspects of their lives. Higher education helps students unlock their latent potential as they discover new knowledge and build skills they previously lacked.

And although these may seem like benefits to individual college graduates, they trickle down to benefit us all in ways large and small. Less crime. Fewer incarcerated parents. More productive workers. Citizens more engaged in their democracy. We can’t properly value many of these benefits because their impact reaches so far beyond what we can measure in financial terms alone. But we’re an immeasurably richer society as a result. Students would benefit enormously from increased college access and completion.

We all would. A college education makes workers as well as their coworkers more productive. It reduces reliance on government while increasing tax revenues. And in a consumption-driven economy such as our own, higher incomes fuel faster growth. Faster growth then results in higher income. It’s a virtuous circle.

Consider the example of college towns. A Wall Street Journal analysis revealed that America’s college towns are more economically vibrant and resilient than similar towns without universities. With a broad base of highly educated workers, college towns are magnets for businesses eager to hire graduates with the skill sets they need. And college towns are also home to the world’s foremost researchers, meaning local companies can draw on their expertise and faculty often start businesses there. The Journal’s analysis found that counties with flagship land-grant universities have experienced a median jobless rate that is 1.2 percent lower than other counties since 2000. College town counties also recovered from the recession quicker.

Some critics of higher education point out that there are currently openings in the skilled trades — namely in fields such as construction, manufacturing and maintenance. There are and will continue to be opportunities in these skilled trades. That’s why we shouldn’t fall victim to a false choice between the skilled trades and jobs that require a college education. Why not both? They’re both critically important. But we should also take an unblinkered view of where new jobs will appear in the future.

The shift in our labor market is unmistakable. The rising tide of technology stands to automate much of the work high school educated workers have traditionally performed. In 2013, two Oxford researchers issued a widely cited paper forecasting that up to half of U.S. jobs could be automated within two decades. Although scholars disagree on the speed and scale of this disruption, few dispute that many of the jobs currently held by those with less than a college education are at the gravest risk of being automated. And it’s incumbent upon us all to ensure those workers have the skills necessary to continue to reap economic opportunity.

This isn’t to say the United States can’t host a vibrant manufacturing sector. It certainly can. But American manufacturing is growing increasingly sophisticated, meaning new jobs will typically require education beyond high school. Think of the most groundbreaking sectors in the global economy — from artificial intelligence to biotechnology, clean energy to advanced pharmaceuticals — and you can trace their roots to research undertaken at American universities. You’ll also find these industries require a highly skilled workforce. But technology is open source, available to our companies as well as our global competitors’.

What has distinguished the American economy for generations is not just our unrivaled technology but our singular commitment to a highly educated citizenry.

No longer. Just since 2008, states have slashed their funding to public colleges and universities by 16 percent per student. These cuts are the continuation of a decades-long trend of state disinvestment from higher education. Such short-sighted cuts deny our country the long-lasting benefits outlined above. And while public universities have worked assiduously to reduce overhead and contain costs, state funding cuts that prove so steep and prolonged will ultimately come at the expense of college access, quality, or affordability. That hurts the three-quarters of college students who attend public institutions and it inevitably clouds our nation’s long-term economic outlook. But these institutions are not destined to decline. States should reinvest in them to spur student success and strengthen our economy. And the federal government can help states to do exactly that by providing states incentives for redoubled investment in their public universities. There’s scarcely a better investment in our future.

Because as the United States has retreated from its commitment to higher education, our fiercest competitors have advanced theirs. Our counterparts and competitors abroad are importing the winning model we pioneered. They’re investing heavily in their human capital and their research universities. They’re recognizing that the growth industries of the future require millions more college-educated workers than they currently have. They know the 20th Century was the American Century because we seized the human capital century and educated millions of our citizens as no other country did.

Claudia Goldin and Lawrence Katz, the Harvard economists, issued a clarion call in their book on the race between education and technology. The advance of automation and the flattening of the global economy, they write, mean we’re now racing against both technology and our competitors as never before. This reality presents an urgent challenge to ensure every American has access to the education necessary to write their own destiny. And that challenge raises anew the question of whether we will make this new human capital century an American Century. Our history and economy tell us we can’t have one without the other.