Thx Jadrian! This is a complex subject. Although, I think universities need to have this kind of conversation with their prospective students, my sense is they’re not. Just assuming it’s a worthwhile investment without considering the overall costs, the potential future earnings of each degree and the opportunity costs is not sensible. Maybe some colleges are doing this now, but I believe the incentives to do so are low because it’s likely to reduce demand for certain majors and have students/parents consider lower priced colleges or even not go at all.
One of the tough parts of the whole conversation is assuming college is only an investment, and ignoring the consumptive benefits associated with athletics, greek life, etc. It's something I used to spend an entire week talking about in my labor economics course.
Universities and lenders rarely seem to consider the course of study when making lending decisions; all degree programs are treated equally, regardless of their future earning potential (and, thus, ability to repay loans). Larry makes a great point about the perverse incentives at play.
While consumptive benefits may certainly affect a student's decision of whether or where to go to college (I myself enjoy many of those benefits and definitely considered them when making my decision), I don't think they should be considered when weighing the *financial investment aspect* of college. A degree in underwater basket weaving from a prestigious 4-star resort, er, university won't pay off those student loans or a future mortgage, etc.
Great post! You mentioned two things that come up quite a bit when I discuss these topics:
Compensating differential is a factor in the difference in salaries between various fields (for example, overnight workers typically get a shift differential), but I think the much more explanatory factor is simple supply and demand. Fewer people have the type of brain required to do well in STEM fields, while most people can do social work or teach elementary school. This isn't a value judgment on the importance of either career, nor saying that either is without hard work and challenges, only that they're *different* in a way that filters out a significant proportion of the population from one but not the other. My summer job right now is throwing boxes in a warehouse, and it pays pitifully -- but anyone who can fog a mirror can do it. I'm not going to command an engineer's salary while doing something that any guy off the street will do for less, no matter how good I might be at it.
You also mentioned changing majors a few times. My whole life story has been of trying to find the thing that I'm passionate about. High school does not prepare students to choose majors which will set them up on a path to contentedness, rather focusing on ability and potential earnings, with perhaps a nod to "that could be interesting". Even a "day in the life" of various professions is hardly ever discussed, instead showing only high-level descriptions and highlight reels. Plus, what 17-year-old really knows what they love and want to do for the rest of their lives?? I'm a strong proponent of the gap year (or in my case, the gap 20 😬) to give people a chance to experience the world and figure out what they enjoy before investing so much into a college education for it.
Thx Jadrian! This is a complex subject. Although, I think universities need to have this kind of conversation with their prospective students, my sense is they’re not. Just assuming it’s a worthwhile investment without considering the overall costs, the potential future earnings of each degree and the opportunity costs is not sensible. Maybe some colleges are doing this now, but I believe the incentives to do so are low because it’s likely to reduce demand for certain majors and have students/parents consider lower priced colleges or even not go at all.
One of the tough parts of the whole conversation is assuming college is only an investment, and ignoring the consumptive benefits associated with athletics, greek life, etc. It's something I used to spend an entire week talking about in my labor economics course.
No doubt that those who don’t go to college are less likely to be exposed to diverse experiences and knowledge. Thanks for expanding the conversation.
Universities and lenders rarely seem to consider the course of study when making lending decisions; all degree programs are treated equally, regardless of their future earning potential (and, thus, ability to repay loans). Larry makes a great point about the perverse incentives at play.
While consumptive benefits may certainly affect a student's decision of whether or where to go to college (I myself enjoy many of those benefits and definitely considered them when making my decision), I don't think they should be considered when weighing the *financial investment aspect* of college. A degree in underwater basket weaving from a prestigious 4-star resort, er, university won't pay off those student loans or a future mortgage, etc.
Great post! You mentioned two things that come up quite a bit when I discuss these topics:
Compensating differential is a factor in the difference in salaries between various fields (for example, overnight workers typically get a shift differential), but I think the much more explanatory factor is simple supply and demand. Fewer people have the type of brain required to do well in STEM fields, while most people can do social work or teach elementary school. This isn't a value judgment on the importance of either career, nor saying that either is without hard work and challenges, only that they're *different* in a way that filters out a significant proportion of the population from one but not the other. My summer job right now is throwing boxes in a warehouse, and it pays pitifully -- but anyone who can fog a mirror can do it. I'm not going to command an engineer's salary while doing something that any guy off the street will do for less, no matter how good I might be at it.
You also mentioned changing majors a few times. My whole life story has been of trying to find the thing that I'm passionate about. High school does not prepare students to choose majors which will set them up on a path to contentedness, rather focusing on ability and potential earnings, with perhaps a nod to "that could be interesting". Even a "day in the life" of various professions is hardly ever discussed, instead showing only high-level descriptions and highlight reels. Plus, what 17-year-old really knows what they love and want to do for the rest of their lives?? I'm a strong proponent of the gap year (or in my case, the gap 20 😬) to give people a chance to experience the world and figure out what they enjoy before investing so much into a college education for it.