These days, it seems as if fewer and fewer of our investments are paying off. If your house is still worth more than its mortgage, it’s probably worth less than you’d hoped. Your 401(k) is ... well, it’s probably better if you don’t look at the statements. Even a college diploma, once the best investment you could ever make, is no longer a surefire ticket to the middle class. Occupy Wall Street’s often incoherent anger welled forth from an all-too-clear fact: College degrees aren’t nearly as valuable as they used to be — and they cost a lot more.
A recent survey of college graduates by Pew found 33 percent of them saying that they were not in jobs that required a college degree. While the average returns to a BA remain substantial over a candidate’s lifetime, that average masks substantial differences in outcomes between graduates in different fields. The survey suggests that high-earning graduates in “numerical” disciplines — such as engineering and computer science — are skewing the mean upwards; in a painful bit of irony, education majors, at the lower end of the distribution, may actually be losing money on the decision to go to college.
That’s in part because the cost has risen so substantially, much of it financed with debt. According to Pew, the average loan debt for a newly minted college grad is $23,287 — up from about $17,000 in 1996. The number of borrowers has also increased, to 60 percent of the total. Almost half of all college grads say that their debt has made it hard to pay their bills and make ends meet; a quarter say it has impacted their career choices, or made it harder to buy a home.
Drowning in the debt that was supposed to finance our American dream — that sounds familiar, doesn’t it? And indeed, it’s hard not to see a pattern. Law professor and blogger Glenn Reynolds put it succinctly in a recent op-ed for the D.C. Examiner:
“The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle class people.”
Whether or not government policies to promote homeownership helped inflate the housing bubble — and there’s a raging debate on that issue — it’s eminently clear by now that political fantasies about the transformative power of homeownership sapped the political will we needed to crack down on dodgy lenders and wildly unqualified buyers who bought homes they should have known they couldn’t afford. That madness has ebbed, as has the prior fantasy that everyone could retire at 55 through the magic of 401(k)s. But the college fixation remains: You cannot swing a cat in Washington without sending it through a panel on increasing college attendance.
Yet recent research by economics professors Pedro Carneiro, James J. Heckman and Edward J. Vytlacil indicates that a simple brute expansion of college entrance classes may offer a very low return on investment. The “marginal” (read “extra”) students are quite often less prepared by skill and aptitude than the existing students. A college degree may prove less valuable to them (and society) — assuming they graduate at all.
This instinct to dress up the poor in the trappings of the middle class is distressingly common in public policy. How many times have massive, gleaming new housing projects been unveiled that promised to lift the poor out of their decrepit surroundings — only to end up as concentrations of poverty and dysfunction worse than the slums they’d replaced? To see this phenomenon writ large, head to western New York state and take a look at the many hideous (and now empty) “urban renewal” projects that were supposed to fix the region’s decades-long economic decline by giving it the same sort of buildings as more prosperous cities. Buffalo even has a single 6-mile subway line running half-empty up and down its Main Street.
Lest you think I’m picking on liberals, this vice is certainly bipartisan. I recently reread “American Dream,” Jason DeParle’s excellent book about the lives of three welfare mothers after welfare reform. It is impossible to read this book, or volunteer with low-income single mothers (as I have) and think that the conservative fetish for “marriage promotion” will solve their problems. These mothers frequently live with boyfriends. But many of the men in poor communities are dead or in jail, KIA or MIA in the war on drugs. Many of the rest are low-skilled workers with chaotic life histories and intermittent work records. Will a marriage license make them reliable, untroubled? Will it get them a job?
To see the problem with this idea writ really large, of course, you need only look at the current trouble in the euro zone. Its economic planners — somewhat incredibly — thought that if they could just dress Greece up in Germany’s credit rating, Greece would actually act like Germany: high productivity, high levels of public trust and tax compliance and sound government accounting. This theory is undergoing an explosive and public collapse, just like all our domestic efforts have done.
There are many things we can do to help those who are struggling — whether they are people, regions, or nations. But simply helping them “invest” in a middle class façade shouldn’t be one of them — particularly if they have to borrow the money to buy the costume.
A recent survey of college graduates by Pew found 33 percent of them saying that they were not in jobs that required a college degree. While the average returns to a BA remain substantial over a candidate’s lifetime, that average masks substantial differences in outcomes between graduates in different fields. The survey suggests that high-earning graduates in “numerical” disciplines — such as engineering and computer science — are skewing the mean upwards; in a painful bit of irony, education majors, at the lower end of the distribution, may actually be losing money on the decision to go to college.
That’s in part because the cost has risen so substantially, much of it financed with debt. According to Pew, the average loan debt for a newly minted college grad is $23,287 — up from about $17,000 in 1996. The number of borrowers has also increased, to 60 percent of the total. Almost half of all college grads say that their debt has made it hard to pay their bills and make ends meet; a quarter say it has impacted their career choices, or made it harder to buy a home.
Drowning in the debt that was supposed to finance our American dream — that sounds familiar, doesn’t it? And indeed, it’s hard not to see a pattern. Law professor and blogger Glenn Reynolds put it succinctly in a recent op-ed for the D.C. Examiner:
“The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle class people.”
Whether or not government policies to promote homeownership helped inflate the housing bubble — and there’s a raging debate on that issue — it’s eminently clear by now that political fantasies about the transformative power of homeownership sapped the political will we needed to crack down on dodgy lenders and wildly unqualified buyers who bought homes they should have known they couldn’t afford. That madness has ebbed, as has the prior fantasy that everyone could retire at 55 through the magic of 401(k)s. But the college fixation remains: You cannot swing a cat in Washington without sending it through a panel on increasing college attendance.
Yet recent research by economics professors Pedro Carneiro, James J. Heckman and Edward J. Vytlacil indicates that a simple brute expansion of college entrance classes may offer a very low return on investment. The “marginal” (read “extra”) students are quite often less prepared by skill and aptitude than the existing students. A college degree may prove less valuable to them (and society) — assuming they graduate at all.
This instinct to dress up the poor in the trappings of the middle class is distressingly common in public policy. How many times have massive, gleaming new housing projects been unveiled that promised to lift the poor out of their decrepit surroundings — only to end up as concentrations of poverty and dysfunction worse than the slums they’d replaced? To see this phenomenon writ large, head to western New York state and take a look at the many hideous (and now empty) “urban renewal” projects that were supposed to fix the region’s decades-long economic decline by giving it the same sort of buildings as more prosperous cities. Buffalo even has a single 6-mile subway line running half-empty up and down its Main Street.
Lest you think I’m picking on liberals, this vice is certainly bipartisan. I recently reread “American Dream,” Jason DeParle’s excellent book about the lives of three welfare mothers after welfare reform. It is impossible to read this book, or volunteer with low-income single mothers (as I have) and think that the conservative fetish for “marriage promotion” will solve their problems. These mothers frequently live with boyfriends. But many of the men in poor communities are dead or in jail, KIA or MIA in the war on drugs. Many of the rest are low-skilled workers with chaotic life histories and intermittent work records. Will a marriage license make them reliable, untroubled? Will it get them a job?
To see the problem with this idea writ really large, of course, you need only look at the current trouble in the euro zone. Its economic planners — somewhat incredibly — thought that if they could just dress Greece up in Germany’s credit rating, Greece would actually act like Germany: high productivity, high levels of public trust and tax compliance and sound government accounting. This theory is undergoing an explosive and public collapse, just like all our domestic efforts have done.
There are many things we can do to help those who are struggling — whether they are people, regions, or nations. But simply helping them “invest” in a middle class façade shouldn’t be one of them — particularly if they have to borrow the money to buy the costume.
