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Is It Fair for Education to Be Cheap

Brad DeLong, professor of economics | March 17, 2010

There is a great tension at the heart of American public higher education. On the one hand, the people who benefit from public and publicly-funded higher education are primarily people who are or will be relatively rich–they will, after all, have a college education, and we know now that people with four-year B.A.s have incomes more than 70% higher than those who finished their education with high school. Publicly-funded higher education is thus, on average, a transfer of wealth from taxpayers in general to the upper-middle class of America today.

On the other hand, the fact that education is as expensive as it is appears to be keeping a great many people from acquiring more. This current cohort of white, male, native-born twenty-year holds will–for the first time in American history–have no more education than their predecessors of a generation ago. This is extraordinary, given that this is a generation during which the college salary premium has risen from 30% to 70%. The returns to college are much greater than they were a decade ago? So why aren’t more people attending.

The answer is that lots of people fear college because it is expensive: they would have to go into debt to attend, and they fear to do so.

So our dilemma: if we don’t keep college cheap–and publicly-funded–we find it next to impossible to increase educational opportunity; if we subsidize college with public money, we are transferring from the not-so-rich to the relatively rich.

Comments to “Is It Fair for Education to Be Cheap

  1. I don’t think you should look at it as though the not so rich are paying for the the relatively rich to go to college. They are paying for people who make the right decisions and choose to do well in school to have the opportunity to gain higher education.

  2. Michael has it spot on. There is something to be said for the institutions which will provide more specific training for their employees to do the required work. I think that higher education should provide everything but the very specifics of certain jobs which must be learned in the trade, but then again, the workplace training will be a cut-down course that acknowledges the likely rise into a higher-paying position (at another company, perhaps) that will come of the training. It may be possible to initiate some sort of contract system. The trouble is this generation, though, back in my day we were with employers for decades, not months, and i personally experienced a much more trusting in-house education/work system working in my day. Matt

  3. Today it is hard to get into college and the potential student has hundreds of question. They need someone to answer these questions and it would be nice to have some kind of guide. A free education guide is what they need that is written by college professor’s for new students. The guide contains answers for financial aid, admissions testing, finding your degree program, school grants from government web site, scholarships and more. I am a graduate of Mass Bay Community college class of 1996 alumni in General Motors ASEP Program. If I had this guide then it would have made it easy getting into college.

    Free Education Guide

  4. America is the land of opportunities. Not subsidizing education and making it very expensive will rob numerous people of their opportunities. Education need to be subsidized.

  5. It is a vary nice web side Whether you are just starting as a new employee, single still, or you have already a family to support, it is not extremely late to work online for that college degree that you have not classic in the traditional school you attended before. Distance education institutions are likely to credit you with the units in college you earned earlier. In fact you already have an advantage over those who are just starting their college studies online.
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  6. I think that higher education expense needs to find a balance as with all things in life. It probably should be expensive enough so that the person being educated sees the value of it, but not prohibitively expensive so that so many can’t afford it. That’s a fine line, I guess, but probably the best solution.

  7. What’s keeping most kids from entering college is its being so expensive. For the not-so-financially-blessed, it’s like having to decide whether you go to school to get a degree or use the money for food and home expenses.

    Amy Cameron
    BuildMySiteforFree.com

  8. REALITY CHECK ON THE VALUE OF UC

    It was at one time correct to claim that California’s prosperity was due to higher education, but it must now be recognized that since California’s political, economic and social institutions have failed as much as they have today then it is the providers of higher education who must also accept some responsibility and accountability for those failures.

    A worst-case scenario for California is that neither the UC faculty nor UC’s administration have been willing to admit their failures that enabled the totally unacceptable consequences of climate change we are experiencing in California today.

    The fact is that failures by the UC culture have resulted in out of control drought, clean water shortages, firestorms, and economic failures as documented in the most excellent September/October 2006 CALIFORNIA Alumni Magazine “Global Warning” issue.

    To this point, UC’s failure to prioritize Humanity over H(olocaust) Bombs resulted in a worst case scenario of LLNL failures with the National Ignition Facility as reported in “Fusion Factory Starts Up”
    http://www.spectrum.ieee.org/energy/nuclear/fusion-factory-starts-up

    President Eisenhower must have been thinking about UC scholars when he wrote his 1961 “Farewell Address to the Nation” which the UC Powers That Be marginalized because his gravest concern was “The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.”
    http://mcadams.posc.mu.edu/ike.htm

    Perhaps Rev. Jim Wallis said it best in his March 1, 2010 AARP Bulletin “Good News About a Bad Economy” Opinion “We need a moral recovery to accompany the economic recovery, and we must not go back to business as usual; rather, we need a new normal. We need to ask the values questions that are at the heart of how we got into this crisis and are critical to getting us out of it. We must set aside the maxims that overtook us—Greed Is Good, It’s All About Me, and I Want It Now—values that wreck economies, cultures, families, and even our souls.” To this point, I only need refer you to “Big Oil Buys Berkeley.”
    http://www.latimes.com/news/opinion/commentary/la-oe-washburn24mar24,0,6

    So how much longer will clean water, job and economic recovery imperatives fail to be realized because of UC’s failed priorities? UC must face the fact that we can no longer afford to watch and do nothing about permanent solutions for clean water, as the Cover Stories on “Water” in the April 2010 warn us about.
    http://ngm.nationalgeographic.com/

    I wondered why the UC culture has produced so many failures, and found an answer in a conclusion that Will and Ariel Durant came to after studying the lessons of history for many decades:
    “When a civilization declines, it is through no mystic limitation of a corporate life, but through the failure of its political or intellectual leaders to meet the challenge of change.”

    Further, the root cause of UC’s cultural failures to protect and preserve civilization as a highest priority was defined by Ornstein and Ehrlich who wrote “Although we are evolving, our mental machinery will not change biologically in time to help us solve our problems.”

    So it must be true that the prefrontal cortex of our intellectual leaders still hasn’t evolved far enough beyond that of chimpanzees.

    Thus a most important question that must be answered to allow us to begin to reassess the value of a UC education today is:

    Is UC capable of accomplishing the task of saving Humanity, or shall we continue to devolve into another failed democracy, failed civilization, and possibly extinction because UC’s tenured intellectuals continue to fail to meet the challenge of change?

  9. I’m not sold on the idea of subsidized education being a wealth transfer. What about all the new industries the UC system has created? Nuclear technologies, bioengineering, nanotechnology, and a plethora of companies in Silicon Valley are all due to public education. Sure, the individual gets help with school, then goes on to make lots of money, but his or her genius ideas raises all boats. Funding higher education is like funding human venture capital. For every dozen non-marketable art majors you fund, you get one or two people who make the next killer app.

  10. “if we don’t keep college cheap”

    Brad, are you kidding us? I know they probably asked you for a controversial sound bite, just like Larry Summers, but come up with something that passes the sniff test, please.

    College is NOT cheap. Tuition is $10k a year. Living expenses are…the same as everyone else’s. A poverty-level existence in Berkeley is about $20,000 a year. Throw in a little more for books and endless fees, and because classes are oversubscribed, don’t expect to graduate for at least 5 years. Which leaves us at somewhere around $150,000.

    Is that cheap? The median household wealth in America is $93,000, and many of these households have been saving for literally decades. So, I’d say no, a $150,000 education is very expensive.

    Let’s take it a little further. Should high school be cheap? We know high school grads make a lot more than high-school dropouts, so this is a net transfer from the poor to the wealthy too. SO UNFAIR. Those damn WEALTHY PEOPLE OF THE FUTURE getting a free public high school education. The injustice MUST be stopped.

    What it comes down to: the social contract. We pay taxes. We follow the laws. We fight when ordered. We expect, under all circumstances, safety, basic health and food, infrastructure, and, yes, education.

  11. For Prof DeLong – Might what Michael Kelly has observed at the corporate level also be a factor for the states themselves? In an increasingly mobile society, there is no guaranty people educated in a particular state won’t move somewhere else once they graduate. A shift in higher ed funding from the states to the feds could mitigate this to some extent.

  12. If good education is accessible on merit rather than patrimony, what more fair can you think off? The current system is very unfair to the young generation, as you can’t get education without going into rather ridiculous debt. There is not much rationality in the current ratio of college fees and future perspectives.

    The winners of the current system are:
    (1) banks, which are going to claim a portion of future productivity regardless of economy trajectory, and without doing much;
    (2) corporations, which get ready expertise rather for free.

  13. In Australia, students can ask the government for a loan to pay their fees. The loan is repayable through the tax system. The Australian Tax Office calculates repayment for each year, based on the student’s taxable income. If a student’s taxable income does not exceed a minimum threshold, no repayment is made.

    In effect, the Australian government bears the risk of a student not being able to earn enough taxable income to repay the loan.

    For more information, see: http://www.goingtouni.gov.au/

    Kien

  14. Seconding Richard here – tax the rich. Tax the rich corporations. We’ve been playing a game that if we don’t, we’ll somehow magically get rich ourselves, through trickledown. That hasn’t worked, so let’s try taxing the rich and spending it on ourselves.

  15. I am an American living in Switzerland (and with a son in grad school at Berkeley). Higher education is basically free here (a few hundred dollars/year). And there is a legal requirement that parents support the living expenses of their children as long as they are in school.

    There are many quirks in the outcomes. I don’t have any way to guess how many of these are caused by the funding process, but I find them interesting.

    1. Only about 30% of students go to college. This is partly due to high academic standards for admission, but seems also to be very much influenced by the attractions of choosing one of the other very excellent education paths to employment here.

    2. Kids seem to take very light course loads, and it is common for them to be still in school at 30 or even later.

    3. There are very few students who choose to stop their education at a Bachelor’s level. Virtually all go to the Master’s level, and a very high percentage get Ph.D.s (at least in the sciences).

    4. A lot of people do their education in two segments. Start with a non-university education, go out into the workforce for a few years, go back to school, pass the university admissions test, and start on a degree.

    Not sure what any of this means, but it is an interesting contrast to the situation in the US.

  16. Education also cuts down on the training that firms need to do to increase general human capital. (Nearly all of the firms that I know of have eliminated training programs that do not merely increase firm- or industry-specific human capital.) These increases in general human capital are difficult to capture since an employee can quit and join another firm. (That’s why most firms that have a tuition benefit only let you take a course or two at a time, but this is probably not optimal for most potential students.)

    If there were a solution (perhaps a form of contract) that allowed firms to capture some of the value of higher education, they would be more willing to pay for it. In this case, the general taxpayer would not be on the hook to provide a subsidy so that individuals could increase their human capital and keep most of the surplus.

  17. “So our dilemma: if we don’t keep college cheap–and publicly-funded–we find it next to impossible to increase educational opportunity; if we subsidize college with public money, we are transferring from the not-so-rich to the relatively rich.”

    As Mark Thoma said there’s an easy answer to this. If you think that the wealthy aren’t paying enough there are ways to make them pay more without doing something as harmful as strongly decreasing incentives to get an education. You make more progressive income taxes, which due to the long established income and substitution effects, and empirical evidence, have little, no, or positive effects on work hours, for taxes anywhere near their current level.

    This is quite analogous to the idea of raising the gas tax but making up for it 100% with a cut in income taxes. People pay the same amount in taxes overall, but they have an incentive to do something positive — take into account the enormous externalities of car pollution and sending money to terrorists and some of the worst authoritarian regimes in the world.

    This is why I support free college (bachelors degree) for everyone. Yes the wealthy don’t need it free, but you can make up for it anyway by just increasing their income taxes, estate taxes, with progressive property taxes, and the like.
    But if you start complicating the system by saying you need financial aid forms, and there are restrictions, it starts becoming an intimidation for the poor, and disinformation starts spreading that maybe college isn’t affordable.

    We don’t live in a freshwater economist’s model. Information and decision making is not perfect (especially among poor teenagers), transactions costs and time aren’t zero, and self discipline is not perfect (especially for teenagers).

    Free college (and preschool), like free K-12, sends a strong clear message about the commitment to, and affordability of, education. You just make up for any non-progressivity with other taxes.

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