Free College Will Increase Inequality; Here’s A Better Alternative

I watched in curious awe as Democratic leaders, including Hillary Clinton, spent the last week celebrating New York’s new law for free college tuition. Most of the evidence I’ve seen suggests that when governments attempt to force-feed the economy more academic degrees, inequality increases, as graduates watch their earnings plummet when they are thrown into a job market that doesn’t need their skills.

A better alternative, already successfully implemented in Germany and Switzerland, is to increase apprenticeships, where students earn a salary while learning practical skills.

As for the evidence on free college and inequality: I think one of the most compelling cases comes from Taiwan, where a huge spike in college enrollment has led to a ~25% dip in graduate wages. The graph below comes from the wonderfully titled, “Massification of Higher Education in Taiwan: Shifting Pressure from Admission to Employment,” published in the Journal of Higher Education Policy in 2015 (the “x”-dotted line shows increasing enrollment and the triangle-dotted line represent decreasing college-grad wages).

Portugal and Japan have experienced similar downward wage pressure from an unnatural injection of college graduates into the economy.

The result, already hitting Americans, is a steady and large increase in the number of college graduates working minimum wage jobs. New York is about to see a lot of Starbucks baristas that can write a 25 page term paper but can’t escape their parents’ house.

A better alternative

A better alternative that I think needs exploring is the use of apprenticeships. In Switzerland, a majority of students begin working in high-skilled jobs while attending the equivalent of junior college part-time. Many have zero debt and go on to prestigious occupations in the tech and pharmaceutical industry.

So impressed by the Swiss model, the Governor of Colorado has recently spearheaded a state-wide initiative to adapt much of their system in a new vocational path for their students.

The Swiss model provides good evidence that it’s possible for millions of students to all work and learn at the same time. Apprenticeships place employers in the curriculum drivers seat; students only attend classes in math, science, and communication that businesses know will help their future employees perform better on the job.

There’s simply no need for students to spend four years outside of the real world at a giant party funded by taxes and debt.

A path forward

Now, to be sure, there’s a lot of work that needs to be done to make sure that vocational learning can become mainstream in America. Switzerland and Germany have had apprenticeships in place for centuries, so it’s hard to know how to duplicate their system.

But, if we care about inequality, free college will likely make the problem worse while apprenticeships will help. I’m working on policy ideas at the federal level to address this issue and I welcome any thoughts (in the comments below or feel free to email me!).

Gregory Ferenstein is the editor of the Ferenstein Wire. Sign up for the newsletter here. Contact him at greg@gregferenstein.com