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Value of higher education is underrated, not overrated

Dane Smith//November 18, 2015//

Value of higher education is underrated, not overrated

Dane Smith//November 18, 2015//

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The notion that college and higher education is overrated or unnecessary has gained currency in recent years, owing in part to rising student debt and disappointing entry-level pay and benefits, even for the growing number of jobs that require degrees and credentials.

We hear anecdotes all the time about Ph.D.s waiting tables and master’s degree holders with $100,000 or more in student debt. We also know that many of the low-skill service jobs being created, in the slow recovery from two recessions in the 2000s, still do not officially require even a two-year degree.

Higher education attainment correlates with positive fiscal effects for governments in the form of more taxes paid and fewer services used, according to a study by the Lumina Foundation. Chart: Lumina Foundation
Higher education attainment correlates with positive fiscal effects for governments in the form of more taxes paid and fewer services used, according to a study by the Lumina Foundation. Chart: Lumina Foundation

But we also know that career progress and eventual financial security remains more strongly tied than ever to at least some post-secondary attainment. We know that young people and middle-aged workers quickly run into dead ends if they want to advance their careers or change jobs and they lack credentials. And we know that stark racial disparities in higher-ed completion, as Minnesota becomes rapidly more diverse, are a direct threat to our workforce readiness and the growing demand for skilled workers as the baby boom retires.

And the bottom-line statistical evidence remains overwhelmingly strong about the advantage to individuals, and to the rest of society, from post-secondary completion.

The latest bracing antidote to the anecdotes and the contrarian dissing of higher-ed is a new study released by the Lumina Foundation, “It’s Not Just the Money: The Benefits of College Education to Individuals and Society.” The 72-page report was authored by Philip Trostel, at the Margaret Chase Smith Policy Center & School of Economics at the University of Maine.

The study enumerates 33 quantifiable benefits for college degree completion. Only two of the 33 are directly related to the so-called “earnings premium” for the degree-holder.

That earnings premium advantage remains substantial, however, and is actually growing, according to the report. Annual average earnings for a bachelor’s degree are, conservatively, about $32,000 higher than for a high-school diploma ($56,000 vs. $24,000). For holders of a two-year associate’s degree, annual average earnings are $12,000 higher, ($36,000 vs. $24,000).

The more important larger story is that beyond the paycheck, for individuals and the public, the benefits really kick in and compound themselves for degree-holders. We won’t list all the other 31 additional advantages in the report, but here are some, comparing bachelor’s degrees to high-school diplomas. The benefits for two-year degrees are less dramatic, but still substantial, and also documented in the report.

Degree-holders are: 3.5 times less likely to end up in poverty; 47 percent more likely to have health insurance; 72 percent more likely to have an employer-sponsored retirement plan; 2.4 times less likely to receive worker’s compensation for a job injury; 2.2 percent less likely to end up drawing unemployment benefits; 25 percent less likely to retire early; 44 percent more likely to report being in good health; 3.9 times less likely to be a smoker; 4.9 times less likely to end up in jail or prison.

In addition, there are these surprising personal and societal benefits for college degrees over high-school diplomas. College graduates are: likely to live 7 years longer; 21 percent more likely to be married and 61 percent less likely to get divorced; paying $273,000 more in taxes and demanding $81,000 less in government services; 2.3 times more likely to volunteer and the value of that labor is 4.1 times greater; donating 3.4 times as much to charity; and they are voting and participating politically at much higher rates.

These “other” benefits, the report says in summary, “appear to be at least as important as the well-known effect on earnings.” But “public policy debates about postsecondary education frequently omit more than half the story…The public good aspects of college attainment appear to be increasingly forgotten.”

Too much focus in public policy on the earnings premium and not enough on these wider benefits has led to steady disinvestment in higher education by governments and taxpayers over the last 35 years. In 1981, half of all dollars for degree-granting institutions came from federal, state or local government appropriations. By 2012, that percentage had fallen to 22 percent, according to the Lumina report, and skyrocketing tuition and debt load have been a direct result.

The good news is that Minnesota’s Legislature and other policymakers seem to be finally headed in the right direction on higher-ed. In 2015, we finally joined about 30 other states in setting a specific goal for post-secondary completion, specifically, 70 percent of those age 25-to-44 having some sort of accredited credential by the year 2025. This goal-setting in Minnesota will include careful attention to how communities of color are faring. Without significant progress for youth of color, the goal won’t be reachable.

Efforts to increase system funding and slow tuition growth — while rewarding better performance from campuses that show progress in getting their students to completion and reducing racial disparities — are also advancing. Strong new local community partnerships with a holistic focus on “birth-to-career” support and success, and goals of post-secondary completion rather than a high-school diploma, are proliferating from Grand Rapids to Austin, and in the Twin Cities too.

Among the creative new ideas in play in Minnesota is a redesign of our K-12 and higher-ed systems into prep schools designated “11-to-14 schools.” This intriguing and promising concept, already being implemented in some school districts, was outlined in a recent Civic Caucus interview featuring Bob Wedl, a former commissioner of the Minnesota Department of Education.

Other proposals to dramatically reduce costs — such as the bill introduced last year that would have made community college free in Minnesota — are getting serious consideration. We must push policymakers toward making some minimal level of higher-ed attainment truly cost-free and debt-free, especially for low- and middle-income families and students of color.

We took such a bold education entitlement advance a century ago when the high-school movement took hold. We expanded free public education through the 12th grade, and many economists agree that this step dramatically boosted economic growth and progress in our state and nation. Our workers and our economy and our society need another such giant leap.

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