Is College Worth the Cost? Yes. But Not for the Right Reason

Is college still worth it? It’s almost sad that we increasingly have to ask ourselves that question. And yet the soaring cost of college coupled with a poor economy makes it a necessity for cash-strapped young adults.

Fortunately, the answer appears to be yes, although not for the reasons one would hope. A new Pew Research Center study finds that not only is college worth it, but it’s becoming an ever-smarter investment. Pew’s researchers write:

On virtually every measure of economic well-being and career attainment—from personal earnings to job satisfaction to the share employed full time—young college graduates are outperforming their peers with less education. And when today’s young adults are compared with previous generations, the disparity in economic outcomes between college graduates and those with a high school diploma or less formal schooling has never been greater in the modern era.

But the real story isn’t that the wage gap between college and high school graduates is growing…it’s why. The research found that the median, inflation-adjusted income of 25- to 32-year-olds actually hasn’t changed very much since it peaked in 1986. In fact, the so called “Late Boomers” had median earnings of $44,770 in 2012 dollars while Millennials only earn $45,500. In other words, annual wages for college graduates has only ticked up by $730 in just under 30 years.

The real reason then that a college degree is “worth more” is that the median annual earnings of those with only a high school diploma have fallen through the floor. From their peak in 1979, the typical high school graduate’s earnings has fallen $4,299 to $28,000.

Let’s be clear: This is not progress. For college to be a “better investment” or truly enjoy a “wage premium” relative to other education or career options the measure must be college graduates earning more, not high school graduates making less. And yet they’re not.

This is especially troubling given the soaring cost of college. Recent data shows that the price of tuition has increased 650 points above inflation since 1978. To put that number in perspective, the housing market (an asset bubble whose collapse played a prominent role in the recent recession) only increased by 50 percent over the same period. As costs have soared, so too have young adults’ reliance on student loans. In fact, total student loan debt has grown by more than 56 percent in the last five years.

Young adults are being squeezed on one end by higher tuition and on the other end by a poor economy and lower wages.

“Young college graduates are having more difficulty landing work than earlier cohorts,” the Pew analysis reads. “They are more likely to be unemployed and have to search longer for a job than earlier generations of young adults.”

All of these are problems that stem from a breakdown in free markets. Government intrusion and regulation into the marketplace, often lobbied for by businesses themselves, has led to vast unintended consequences, including creating classes of winners and losers. If America truly wants to get back on the track of creating well-paying jobs across the spectrum of educational attainment then it’s government needs to get out of the business of attempting to legislate economic outcomes. That means a lot of things: improving the incentive structure of its subsidy schemes to encourage work, improving the corporate tax code to make us more competitive in the world market, ending the seemingly endless parade of certainty-shattering regulations, and opening up alternate educational avenues to encourage the type of revolutionary evolution we’ve seen in other fields.

Do those things and a college degree might be worth more…and not just because a high school diploma is worth less.