The Value of Your College Degree Is Collapsing Before Your Eyes

Now that a significant portion of America’s high school graduates are enrolled in college for the first time, it may be worth reviewing whether that’s a good thing. Many of these students think they are making a meaningful investment in their future.

As they see it, as many of their parents do, a college degree will likely and significantly increase their lifetime income, enough to ensure they live middle-class, adult lifestyles complete with a relatively high degree of employment security.

For most of them, attending a university is also consumption spending. An enjoyable period of several years transitioning from adolescence, living at home, and young adulthood—learning but also making new friends, doing previously forbidden things, and having lots of fun outside the family setting.

With that in mind, it may come as a shock to learn that college enrollment now is lower than it was 15 years ago. In the first two decades of this century, I argued that the sharply rising cost of college was a growing obstacle to university attendance: my first book on the topic, in 2004, was titled Going Broke By Degree. Yet in the last few years, the inflation-adjusted rise in college fees has abated, but attendance has not soared as in the past. Why? New evidence suggests that the wage premium associated with a college degree has markedly declined, with many fearing the AI revolution may sharply reduce the advantages of superior brainpower gained while earning a degree.

In a study published by the Social Science Research Network, scholars Jose Azar, Mireia Gine, and Javier Sanz-Espin looked at the wage premium associated with a college degree, noting that it rose substantially from 1979 to around 2015 but has undergone an accelerating decline, especially in the last three or four years. Spending time and money on anything is a cost-benefit proposition, and while higher education costs are stabilizing somewhat, the pecuniary benefits are apparently now falling.

The wage premium associated with a college degree has historically been related at least partially to vocationally useful things many students learn in college, but also with the fact that college has generally been a device sorting the brighter, more disciplined, and harder-working population from the typical non-college-educated individual. I sense that the collegiate sorting advantage has eroded considerably over time.

And the national downplaying of training workers to fill skilled, specialized jobs such as welders, plumbers, or heavy equipment operators has led to supply shortages in those occupations—fields where workers need some training, but not four years of expensive classroom study. The world needs plumbers more than it needs sociologists—and who in the real working world cares about “gender studies”?

Aggravating the problem: college costs have been grossly inflated by massive inefficiencies not tolerated elsewhere in society except in some government bureaucracies. Why do colleges need more “administrators” than “teachers”? Why do many academics work 8-9 months a year yet other professionals like doctors and lawyers work 11 or even 12? Why do university buildings “lie fallow” for months each year, just like some medieval farmers’ fields did before scientific crop rotation practices evolved nearly 1,000 years ago? Because of massive governmental and private philanthropic support, colleges have gotten away with such costly inefficiencies. But as that support has eroded from the ascendancy to campus domination by radical leftish groups impervious to broader public opinion, enrollments and outside financial support have been imperiled, leading to increased campus closings. Even in academia, market forces cannot be ignored.

Key to those market forces is what Joseph Schumpeter once called “creative destruction.” As college closings increase and campus staff layoffs mount, schools are desperately innovating to ward off destruction, including ridding themselves of left-wing shenanigans that imperil funding. In the business world, venerated companies such as Sears and Roebuck and Eastman Kodak died or shrank to accommodate new innovators such as Microsoft or Nvidia. The same process is belatedly underway on our nation’s college campuses.