Two highly contradictory happenings have occurred over the past year. On the one hand, published research increasingly suggests that the high returns on investments in higher education are minimally exaggerated (my argument in a forthcoming book) and often even non-existent (Bryan Caplans point in his new The Case Against Education). The private personal gains from college do not reflect much vocationally relevant learning, but rather diplomas tell employers that recipients are smarter, more disciplined, more motivated workers for reasons unrelated to college skill acquisition. This research suggests that we are over-invested in universities, and that public subsidies for colleges have a relatively low rate of return for the broader society.
The second contradictory trend is a growing movement to encourage attendance by making college free. States such as New York, Oregon and, perhaps somewhat surprisingly, Tennessee, have embraced the concept of free tuition for community college attendance. The newly elected New Jersey governor Phil Murphy has enthusiastically embraced the idea, first prompted most conspicuously by Bernie Sanders, to be financed in New Jersey by raising taxes on affluent residents, with the top rate on the income tax going to 10.75% from 8.97%, as well as increasing the sales tax.
There are some seemingly good arguments for free community college we have free tuition for 11th and 12th grade, why not 13th or 14th grade (community college?) The cost of community college is usually low far less than that at conventional four year universities and often even less than per pupil costs at some outrageously inefficient large K-12 school districts. Therefore there is a case for nudging high-risk students with problematic academic records to go to these lower cost schools rather than expensive four-year universities, with easy transfer to the four-year schools if successful at the community college level. There are also attractive arguments supporting those wishing to acquire skills like driving long distance trucks or welding, well-paying vocational jobs in much demand.
However, there are three problems: the poor academic track record of community college attendees, the potentially very negative economic growth implications from financing so-called free college, and even some fairness issues. The most recent National Student Clearinghouse data show that 47% of community college enrollees drop out of school, far more than the 27% who graduate (others are still in school). Other research shows that completion rates fall the less students pay towards the cost, hinting that free tuition might raise already scandalously high dropout rates.
Decades of research by large numbers of scholars, including myself, show a huge negative relationship between income tax rates and the growth of income. High marginal tax rates, such as proposed by Governor Murphy, are also associated with big out-migration of productive citizenry. Factoid: from 2010 to 2017, some 2,520,022 native-born Americans on net moved into the nine zero state income tax states from the 41 others with such taxes. It is no wonder zero state income tax states like Texas, Florida and Tennessee tend to economically outperform high income tax states like California, New York, and New Jersey.
Rather than greater college attendance enhancing economic growth, my bet is it would be retarded. I have run literally hundreds of regression equations on the relationship between state higher education spending and economic growth: the relationship is almost always negative higher spending, lower growth. Raising taxes on private sector earnings to fund colleges lowers growth because the output reduction associated with higher taxes on the highly efficient and market-directed competitive private sector is far greater than any positive effects of more education administered by less efficient and market disciplined higher education providers.
Lastly, it is unfair, creates poor academic incentives and an un-level playing field when you give free tuition to the academically marginal student entering community college, while her academically superior but perhaps financially similar status classmates face significant tuition charges at four years colleges.
The bottom line: on both growth and equity grounds, the “free tuition for all” model appears far less appealing than it first appears. Perhaps Governor Murphy would achieve better social outcomes by giving state assistance to students not universities, based largely on financial need but also on prospective academic success in other words, some variant on voucher plans used at the K-12 level in several states. But given the research on higher education’s low social return mentioned in the first paragraph, even that approach may be undesirable.