The Case for a Three Year College Degree
March 28, 2013
Reducing the time it takes for a student to complete college could add trillions of dollars in wealth to the U.S. economy. Changes in the labor market and educational institutions mean that now is the perfect time to alter the required time to attain a college degree, says Reuven Brenner, the Repap Chair at McGill University's Desautels Faculty of Management.
- Assume that after graduation the average salary would be just $20,000 and remain there.
- With 4 million students finishing one year earlier, this would add $80 billion to the national income during that year.
- Or at an average annual income of $40,000, it would add $160 billion.
- Assume now that the additional $80 billionin national income would be compounding at 7 percent over the next 40 years.
- This would then amount to an additional $1.2 trillion of wealth -- for just one generation of 4 million students joining the labor force a year earlier at a $20,000 salary.
- At $40,000, this would amount to $2.4 trillion by the 40th year -- again, for just one generation of 4 million people joining the labor force a year earlier.
- The added wealth depends on how rosy one makes the assumptions about salaries or compounding rates.
- Add 10, 20, or 30 generations, each starting to work a year earlier, and the numbers run into the tens of trillions of dollars.
The indirect impacts may be as significant. One or two years of additional, compounding earnings could do a lot to shore up entitlement programs, with a more positive impact than requiring people 65 and older to stay in the labor force much longer: the magic of resulting compounding would start earlier.
Over the past few decades, students have taken too many years to graduate, having plenty of fun along the way (financed mostly by parents or taxpayers) while students in other countries practice greater discipline. For example, students in Israel finish their undergraduate education in three years and exit with skills that companies are looking for. In the United States, 63 percent of employers said that recent college graduates don't have the skills they need to succeed.
Today, we should focus on accelerating learning and on providing youth with real world experiences that match the job market. The government should stop subsidizing schools and universities, and higher education institutions should once again become more selective in who they admit to study.
Source: Reuven Brenner, "Accelerated Learning Would Add Trillions of Dollars in Wealth," The American, March 21, 2013.
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