Is college worth it ... in economic terms?
While teaching at a university in the Great Plains, I frequently posted final grades at the earliest opportunity. This almost always coincided with commencement, and I would finish up my final task for the academic year while graduating students took part in the ceremony marking their final moments as an undergraduate. Afterwards, I would lock my office and make my way across campus on the way home. Every time, I would see students and their families exiting the auditorium on the way to a celebration. Every time, I would be struck by the thought that a fair subset of these students would soon be serving coffee or engaging in some other entry-level employment that did not require a college degree. However, I also knew that another subset would be on to professional school, prestigious internships and high paying jobs.
So, is college worth it? If you're in the group of students headed for graduate school, professional school, or some forms of occupational training; then the answer is a resounding yes. There are occupations and career tracks that require an undergraduate degree, so it is easy to argue that an undergraduate degree is a necessity if pursuing a career in medicine, teaching, engineering, and many health professions. Some jobs require a bachelor's degree, and many rewarding and lucrative careers begin with a bachelor's degree, but a bachelor's degree will by no means guarantee success.
In economic terms, The US Social Security Administration reports that median lifetime earnings of college graduates are approximately $900,000 more and $630,000 more for men and women, respectively, compared to high school graduates. This is a huge pile of money but is the rule of thumb that a college degree is worth this much more actually true? While the average dollar amount is likely correct, the "value" is substantially different. There is an opportunity cost paid by deferring employment while in school, living expenses are accumulated while in school, and college tuition is expensive. If a reasonable discount rate is assumed annually, the Social Security Office's reported value of a bachelor's degree falls to $260,000 and $180,000 for men and women, respectively. Now, these are still significant additional earnings, but if divided over an approximately 40 year career this represents roughly $4,500 to $6,500 more income per year.
This seems reasonable, but I suspect that times have changed and that the data are outdated. Just think about it for a minute. If the data cover an entire career which is 30+ years, then the data are from your parents and grandparents. Since your parents and grandparents lived during the post World War 2 period, these data represent incomes from some of the most prosperous periods in US history. This means one should be cautious when making conclusions about the future. While I agree that past performance is the best predictor of the future, I also know that past performance is not a guarantee of future results. If I sound like the disclaimer on an investment portfolio, its because that is my intention. College education is an investment, and it is not a sin to think of it that way. Should you invest in your future, yes? Is college the best investment for you future, maybe?
That the world has changed, seems correct in anecdotal terms. Wages for non-college graduates have increased, and in some cases are competing with college graduates. While I won't say this is the norm, it is interesting that a newly minted graduate in wildlife biology is qualified as a biological field technician, which pays good benefits and $18-23 per hour. However, my oldest son has worked as a barista for about $16 per hour and was recently offered $23 per hour with excellent benefits and retirement at a medical supply firm operating line equipment. In short, the "average" high school graduate is doing about as well as the "average" college graduate in their first jobs. More importantly, the high school graduate that is employed immediately could earn $176,000 to $264,000 over the 4-6 years that the college student was earning nothing and likely going into debt. If you assume an average college debt of $40,000, then the "average" college student would reap an economic value from higher education remarkably similar to many high school graduates over their earning lifespan.
However, the calculations above presume the "average" (median) values of high school graduates and collage graduates. Those graduates that successfully earn careers in neurosurgery, chemical engineering, and Wall Street finance do immensely better that virtually all high school graduates. The question for students considering higher ed is where do their gifts, drive and talents fall in terms of the average person. In stone-cold real terms, where are you likely to rank among future college graduates may be the most important aspect of wether college is a good choice for you as an individual.
My conclusion is that unless you are reasonably and rationally going to be in the top half of college graduates, then you had better consider the college route very carefully. As with any investment, seek out alternatives and compare the risks and rewards, then make a decision.
May 29, 2023
Social Security Administration: Education and Lifetime Earnings
"being the richest person in the graveyard is pointless" A Better Investment Than A College Degree - How Money Works