ON THE ECONOMY
JULY 13, 2014
Does higher education matter to our economy? Is taking on the enormous debt to pay for a degree worth the gamble? Recent studies provided by Pew Research suggest that not only is a college degree the best investment towards future earnings, it promotes economic well-being and career attainment (Pew Research, 2014).
Quantified benefits of a higher education include
Private economic benefits: higher salaries and benefits, lower unemployment, higher savings, better working conditions, and personal/professional flexibility.
Public economic benefits: decreased reliance on public assistance, increased tax revenue, greater productivity, increased consumption, and increased competitive advantage (through human capital).
Private social benefits: better health, increase in quality of life for children, better consumer decision making, and personal status.
Public social benefits: reduced crime rate, increased volunteerism, social cohesion, increased voting participation, and increased ability to adapt, change and learn (Institute for Higher Education Policy, 2013).
COSTS VS. WAGES
Although the unemployment rate is still quite high (7.5 in July of 2014 down from 8.3 in
December of 2013), economically our young can’t afford not to attend college (Bureau of Labor Statistics, 2014). The study performed by Pew Research, tells us that a college degree increases the real dollar average income of college graduates compared to those that have not attended college. The chart below (Figure A) gives a visual of the projected employment and wages of those with a degree compared to those without.
Employment and Wage Projection
median weekly earnings
Unemployment rate 2013
SOURCE: Bureau of Labor Statistics, Employment Projections, March 24, 2014
SUPPLY AND DEMAND
According to Burleson Consulting, the difference in wages between a high school graduate and a college graduate attaining a bachelor’s degree is almost one million dollars over their lifetime (Burleson Consulting, n.d.). What does this mean to the economy? Investment, whether the consumer is saving or spending, it is injecting money into the economy.
Human capital is a vital factor in economic growth. By increasing a person’s skill level through education, we increase the quality and quantity of goods and services that are outputted. A highly educated workforce is imperative to a stable or growing economy.
Currently, the number of workers seeking jobs is higher than the needs of employers.
The supply and demand for labor is not at equilibrium and we are not at full employment. According to Anthony Carnevale and Stephen Rose of Georgetown
University Center, “Postsecondary education is in high demand among employers, and as the recovery from the recent recession takes hold and hiring resumes, it will continue to be in high demand. The undersupply of postsecondary educated workers has led to two distinct problems: a problem of efficiency and a problem of equity. Without enough talent to meet demand, we are losing out on the productivity that more postsecondary educated workers contribute to our economy”.
The Keynesian theory implies that a company will typically produce what it expects to sell. Therefore its level of production is determined by its demand. The number of employees hired depends on the demand of the product. Currently the aggregate demand for products is low, creating a higher aggregate supply of workers (Wessels,
2012, pp. 102-229).
Typically, firms prefer to hire educated workers over uneducated, allowing them to investment in their human capital for long-term profitability, as well as keeping their marginal product of labor low. Skilled and knowledgeable…