Tuesday, October 26, 2010

We need a culture promoting investment in university education

Last month, Sarah Kaufman published an article in the Washington Post suggesting that for many students college was not a good investment. The relative cost of university tuition and related costs has grown more rapidly than overall inflation, suggesting that college is generally not as good an investment as it was in the past. And clearly some students waste the opportunity provided by a university education.

Kaufman's article points out:
In 2008, the median annual earnings of young adults with bachelor's degrees was $46,000; it was $30,000 for those with high school diplomas or equivalencies. This means that, for those with a bachelor's degree, the middle range of earnings was about 53 percent more than for those holding only a high school diploma.

But a lot of college graduates fall outside the middle range -- and many stand to make considerably less.
Similarly, some non-college graduates make more than the average high school leaver. A college graduate with a major in Norse mythology may earn less than a GED carpenter who has learned to do an important and useful job well.

In my previous posting I suggested that Americans are going to have to cut back on consumption. It seems obvious to me that the cost of a university education can be conceptually divided into investment and consumption. A lot of what one does in college is fun and interesting, but not likely to yield future benefits. Perhaps the consumption aspect of college is one area in which we will have to make savings in the future.

My son divided his college education between Ireland and the United States. His time in Ireland was before the Celtic Tiger days. He was struck by the fact that his Irish friends were much more career oriented than his American ones. In a hard economy, the Irish had learned to invest in university education that would pay off in future jobs and income. It may have been less fun, but it was more prudent. American students may have to learn the same lesson!

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