Thursday, May 16, 2013

College Graduation – Cost and Return

By J. Mac Holladay, founder and CEO.  

Many of us have watched in dismay as state after state have raised the tuition charged for both technical colleges and four-year institutions. These increases have topped 30 percent in many states over the past five years. When you couple that with flat wages and millions of lost jobs, it makes the dream of a college education even harder to obtain. South Carolina has increased their tuition 24 percent since 2006 and now it takes 52 percent of the average per capita income in the state to send a child to college each year. In a state already with low college graduation rates and weak educational attainment across the board, that is clearly the wrong direction and the wrong policy. But South Carolina is by no means alone – every state in the country increased tuition in recent years, many to near-unaffordable levels. Michigan and Vermont also have tuition-to-PCI ratios above 50 percent, and between 2006 and 2011, and public four-year tuition in Arizona increased 43 percent.

The Great Recession has had a dramatic effect in almost every part of the country. In some regions, the recovery remains difficult and slow. It is interesting that while young people ages 18-24 have had an especially hard time that is not true of college graduates, according to a May 4 New York Times article by Catherine Rampell titled “College Graduates Fare Well in Jobs Market.” At the worst time in the Great Recession (November 2010), college grads had an unemployment rate of 5.1 percent. By April of 2013, that number had dropped to 3.9 percent while the overall workforce unemployment rate was 7.5 percent. The number of college educated workers with jobs is up 9.1 percent since the beginning of the recession while high school grads with jobs are down 9 percent. Those without a high school diploma have lost 14.1 percent of their jobs. Those with some college are at the same number of jobs they were when the recession began. So, ALL the net jobs gains have gone to college graduates. The story is the same for those in their 20’s. In 2011 college grads in their 20’s had a 5.7 percent unemployment rate while those with a high school diploma or GED were at 16.2 percent.

The number of people over 25 years old with college degrees has risen to 32 percent from 22 percent 20 years ago. While it is true that many recent college graduates have not been able to find a position in their chosen field, they have found work. The median weekly earnings have dropped very slightly for college graduates from $1,163 in 2007 to $1,141 in 2012, after adjusting for inflation. Today, the full time worker with a bachelor’s degree earns 79 percent more than a worker with a high school diploma, up from 73 percent in 1992 and 48 percent in 1962, though as a recent policy brief from the Brookings Center on Children and Families suggests that this premium varies by major choice.

So in spite of the pain, the time it takes, and the additional cost, the return on investment for having a college degree is very powerful . The Hamilton Project at the Brookings Institute estimates that the average annual return is 15.2 percent. The report states that return is double the stock market investments since 1950 and five times home ownership.

Since we know the number one issue in economic development is the quality of the workforce, it follows that every community should be working on increasing the number of young people that go on to two- and four-year institutions. Those that finish are the number one asset any community can have.