Going to College Isn't an Investment

June 26, 2013

The educational value of college is questionable. In their book Academically Adrift, sociologists Richard Arum and Josipa Roksa conclude that more than a third of recent college graduates coast through college without adding anything to their human capital. Reports that employers often find graduates applying for jobs to be weak in basic skills are numerous, says George Leef, the director of research for the John William Pope Center for Higher Education Policy.

Nevertheless, higher education boosters continue to proclaim that college is undoubtedly "worth it" and "still a good investment." A recent study by the Public Policy Institute of California is a good example of this sort of thinking. It purports to show that earning a college degree "remains a good investment."

  • The technique of this study (and dozens like it) is to compare average earnings of workers who have college degrees with average earnings of workers who don't and conclude that because the first group does significantly better, having gone to college was a good investment.
  • The degrees are regarded as causing the "earnings premium."

That analysis is extremely misleading.

  • The most glaring flaw is that it draws a conclusion about future conditions (earnings that people who go college now can expect) from data based on earnings for college graduates going decades back.
  • Conditions today, both with regard to college academic rigor and the labor market, are much different than they were 40 years ago.
  • If a college degree were a regulated investment opportunity, it would have to bear the standard warning that past performance is no guarantee of future performance.

When college cheerleaders say that there is an earnings premium for graduates, they make it sound just like investing in financial instruments. In truth, going to college isn't an investment at all.

Having a degree used to be a competitive advantage in landing a job, but success always depended on personal performance rather than educational pedigree. College itself isn't an investment; rather it is just one way of increasing your value.

Source: George Leef, "College Is Not an Investment, so We Shouldn't Treat It Like One," Pope Center for Higher Education Policy, June 21, 2013.

 

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