From Charles Hugh Smith at oftwominds.com:
Mankiw’s claim that college costs are the inevitable result of Baumol’s Disease is pure self-serving rubbish.
Everyone who isn’t blinded by self-interest sees that the cost of higher education in America–and the way we pay for it, by turning students into debt-serfs– is unsustainable. Those benefiting richly from the bloated, ineffective bureaucracy see no alternative, of course; their self-serving handwringing would be laughable if it wasn’t so destructive to the nation and the economy.
Greg Mankiw, professor at Harvard, recently offered up a typical helping of self-serving handwringing: Three Reasons for Those Hefty College Tuition Bills. Mankiw squeezes out a few insincere (but necessary for PR purposes) alligator tears over the soaring costs of a college degree, and then trots out the usual justifications for maintaining the status quo, which just so happens to reward him so well.
Let’s dismantle his bogus justifications one by one.
1. Mankiw predictably trots out the Gold Standard of justifying the absurdly high cost of an often-ineffective and useless college degree: those with college degrees earn $1.5 million more over a lifetime of work than those without degrees.
On the face of it, this offers plenty of justification for $120,000 piles of debt for degrees in Critical Studies, etc.: that extra $1.5 million will easily fund the cost of a 4-year degree.
But this data is completely out of date. Yes, a college degree offered substantial lifetime wage increases back when four years of college cost about as much as a new car, not a new house, i.e. the current cost; but as recent graduates have discovered, a four-year college degree offers little advantage, and substantially underperforms journey-person wages for skilled trades workers such as pipefitters, plumbers, etc.
The exception is of course highly technical degrees in engineering, computer science, biotechnology, etc. But this reality has led to a systemic over-supply of graduates with STEM degrees (science, technology, engineering, math), as the economy does not create paid positions in these fields simply because more people have studied these subjects.
As I often note here (and in my book that proposes a much cheaper and more effective system of higher education, The Nearly Free University and the Emerging Economy: The Revolution in Higher Education), employers can only hire employees if the business will earn a profit from their labor–and opportunities to earn a profit in STEM fields are not as abundant as boosters of the status quo claim.
The economy has changed profoundly and structurally in the past 15 years, and the breezy cliche that a college degree automatically boosts lifetime earnings by $1.5 million is no longer supported by current realities. Just having a college diploma offers little advantage, especially when compared to those with real-world skills. Even those with STEM degrees find themselves in a Darwinian struggle to get a job in these fields, a struggle that forces many to get deeper in debt to secure a Masters or PhD.
But alas, tens of thousands of other under-employed college graduates had the same idea, and the job market is over-supplied with graduates holding Masters and PhDs.
Yes, if a student slaves away for 7 years to secure a PhD in computer security, he/she will likely enjoy multiple job offers. But the number of such positions is vanishingly small in an economy of 140+ million workers.
The reality is a college degree no longer offers the leverage it once did, due to simple supply and demand: millions of other people have degrees now, too, including advanced degrees, and the job market doesn’t create jobs just because people have degrees.
To continue reading: The Self-Serving Apologists for Student Debt-Serfdom
