You’ll never find your gold on a sandy beach. You’ll never drill for oil on a city street. I know you’re looking for a ruby in a mountain of rocks, but there ain’t no Coup de Ville hiding at the bottom of a Cracker Jack box…. And all I can do is keep on telling you – I want you, I need you, but-there ain’t no way I’m ever gonna love you. Now don’t be sad. ‘Cause two out of three ain’t bad. The lyrics from this 1977 ballad written by Jim Steinman and recorded by Michael Lee Aday (Meat Loaf), kind of describe the higher education system in America today.
Education statistics were not even kept prior to the Civil War. In 1869, the first year for which data are available, only 63,000 students were attending higher education institutions throughout the country. This was just 1 percent of the 18- to 24-year-old population. Assuming this rate was consistent in Colonial America, would suggest that there were just 25,000 college graduates in the country when it was founded. And of these, the vast majority were members of the clergy. Today, just two out of three Americans don’t attend at least 4 years of college. That means that a third of Americans hold college degrees, a remarkable achievement, much of which has occurred in just the past 30 years. In fact, when I got out of college, only 19.1 percent of the population 25 years old or older held a 4-year degree, while 26.7 percent of the adult population had not even completed high school.
What does this mean for the country?
First, let’s forget about all of the politics surrounding the country’s universities, safe spaces and politically correct speech, and focus strictly on the economics. Has the growth in the college educated population led to better economic conditions in the US?
The first thing to look at should be the correlation between college education and economic growth. If college graduates earn more than non-graduates, as census data shows, there should be a distinct correlation between both average income and GDP. As anticipated, there is a very high correlation between the percent of college graduates and both average per capita income and GDP per capita. In both cases they are nearly directly correlated. Of course, correlation does not mean causation, but this is good evidence that an increasingly educated population is good for the economy. The chart shows the data for the percent change in each of the variables, and how closely they track together.
But for something this highly correlated, the actual impact of college graduation on either income or GDP is extremely small. Looking at just the direct relationship (in other words not controlling for other factors) a one percent increase in the percent of the adult population with a 4-year degree is associated with just a 0.086 percent change in average personal income, and just a 0.067 percent change in per capita GDP. Putting this in dollar terms (2012 dollars), a one percent increase in the adult population with a 4-year degree today (769,240 more graduates) would result in an increase in per capita income (and GDP) of about $38.00.
The average price of a 4-year degree at a public college today is over $26,000 per year (2016) according to the National Center for Education statistics. This means that the cost of 769,240 additional college graduates – assuming that they take just 4 years to complete their degrees – would be more than $80.4 billion. This would result in an increase of GDP of about $13.9 billion. This does not suggest a very good return on investment for those advocating so-called free college for everyone.
Of course, the GDP figure is an annual number, and one can expect to see that grow over time. But even looking out over 30 years, the total increase in GDP would be just $157.1 billion. Businesses would look at an investment like this based on the number of years that it would take to recoup the cost. In this case, the payback period would be about 8 years. In most businesses investments a reasonable payback period is between 3 and 5 years, so from an economic sense, public investment in free tuition is not all that great.
Only in the case of government would free tuition make any sense. But then again, its not really free, its also not the politicians’ money, so whoopie – why not. No matter what the politicians say, there ain’t no Coup de Ville hiding at the bottom of a Cracker Jack box.