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Public Benefits from College Graduates

By Philip Trostel January 29, 2017

At a time of rising tuition, it is understandable that proponents of higher education trumpet the college earnings premium. Despite the rising cost, a college education is still practically a windfall-profit investment for most graduates. In 2012, Americans with bachelor’s degrees and without advanced degrees earned over $32,000 a year more than high-school graduates who never attended college.

Over an average lifetime, this premium is $1,383,000, conservatively assuming that the earnings premium does not continue to increase, as it has for decades. Moreover, with this financial payoff comes the value of substantially better health and longer life expectancy, the value of employer-provided fringe benefits such as health insurance and retirement plans, and the intrinsic lasting value of the college experience. Paying the full sticker price at an elite private college just for the average benefit is still a great investment.

But raising awareness of the college earnings premium has an important unintended side effect: It fuels the perception that a college education is primarily a private good — that the only beneficiaries are the individuals earning degrees. And if a college education is only a private good, then there is no need for public support of higher education. Private goods are effectively provided in free markets, and it is only fair that the beneficiaries should be the ones to pay.

The increasing belief that a college education is mostly a private good is apparent in American public-spending priorities. Despite rising college enrollment, the share of government spending devoted to higher education has been shrinking steadily since about 1980. Government spending on higher education as a fraction of national income has also been shrinking since the early 1980s. Taxpayer contributions to higher education relative to net student/family contributions have decreased substantially in recent decades. Our policy behavior speaks loudly that the perceived public value of a college education has been eroding.

And yet, higher education is clearly not just a private good. Knowledge creation from university research is an obvious public good. This suggests using tax dollars to support such research, if not necessarily to support college attainment.

There are important public benefits from college attainment, though. In addition to the great financial payoff to graduates, college attainment creates at least four important types of benefits for others:

Increased productivity. Given the college earnings premium, it is hardly surprising that regions of the country with higher proportions of college graduates have higher per capita incomes. The disparity, though, is substantially greater than can be explained by the higher incomes of the graduates. In other words, a college education seems to create more aggregate income than the sum of the higher incomes paid to graduates. It appears that a college education not only raises the productivity and income of those getting the degrees but also raises the productivity and income of others.

Fiscal support. It is also hardly surprising that college graduates pay substantially more taxes than those who did not go to college. Hence college graduates contribute more to the financing of public goods that benefit everyone. The magnitude of this effect may be surprising. Over an average lifetime, graduates with bachelor’s degrees but without advanced degrees pay $563,000 more in taxes than high-school graduates who never attended college.

College graduates also create less in government expenditures on public assistance and social insurance, thus benefiting others by freeing resources for other public services and/or reducing others’ taxes. Over an average lifetime, college graduates without advanced degrees receive $50,000 less in Medicaid, Supplemental Security Income, unemployment benefits, and other such benefits than do high-school graduates who never attended college.

The additional taxes and the reduction in the need for benefits that results from college attainment far exceed taxpayer support for higher education, making college a great investment for taxpayers as well. Moreover, just the reduction in transfer payments may exceed government spending on higher education, in which case public support for higher education may reduce the overall size of government.

Philanthropic participation. College attendance increases generosity significantly. College graduates without advanced degrees donate more than three times as much cash to charities each year as do high-school graduates who never attended college. The estimate errs on the low side because it not does include the value of noncash donations, posthumous gifts, or gifts to individuals. The greater earnings of college graduates accounts for roughly half of the additional cash donations. The other half comes from college graduates’ donating a higher proportion of their earnings to charity — 2.3 percent compared with 1.6 percent.

Volunteerism, too, increases significantly with college attainment. Working-age bachelor’s graduates without advanced degrees volunteer at 2.3 times the rate of high-school graduates who did not go to college. That puts total annual philanthropic contributions more than $3,600 — 4.7 times — higher per bachelor’s degree. Total average contributions are 4.1 percent of earnings for those with high-school diplomas, compared with 8.2 percent for those with bachelor’s degrees.

Civic engagement. College graduates are more-active participants in democracy, voting at higher rates and being more politically involved. They are also more active in their neighborhoods through participation in community organizations, working on community projects and attending community meetings. College-educated adults are also more likely to interact with their neighbors. In addition, they are less likely to be involved in criminal activities. In short, college education helps make our communities better places to live.

And these are just the measurable public benefits. Their combined value is probably greater than the college earnings premium, perhaps substantially so. The list does not include other vital public effects that are almost impossible to quantify, such as the positive influences on arts, culture, innovation, and tolerance.

It is not overstatement to call the typically emphasized effect on earnings just a small portion of the benefits of college attainment. Yet the financial payoff alone is too often portrayed as the sole benefit of college. Until this portrayal of what makes a college education worthwhile is changed, the longtime erosion of public support is likely to continue.

What’s more, access to a college education may well continue to be compromised, which makes not just the potential students who are deterred, but all of us, worse off.

Philip Trostel is a professor of economics and public policy at the University of Maine at Orono.

Wanted: Factory Workers, Degree Required

From The New York Times

January 30, 2017

When the German engineering company Siemens Energy opened a gas turbine production plant in Charlotte, N.C., some 10,000 people showed up at a job fair for 800 positions. But fewer than 15 percent of the applicants were able to pass a reading, writing and math screening test geared toward a ninth-grade education.“In our factories, there’s a computer about every 20 or 30 feet,” said Eric Spiegel, who recently retired as president and chief executive of Siemens U.S.A. “People on the plant floor need to be much more skilled than they were in the past. There are no jobs for high school graduates at Siemens today.”

Ditto at John Deere dealerships, which repair million-dollar farming machinery filled with several dozen computers. Fixing tractors and grain harvesters now requires advanced math and comprehension skills and the ability to solve problems on the fly. “The toolbox is now a computer,” said Andy Winnett, who directs the company’s agricultural program at Walla Walla Community College in Washington. These are the types of good-paying jobs that President Trump, blaming trade deals for the decline in manufacturing, has promised to bring back to working-class communities. But according to a study by Ball State University, nearly nine in 10 jobs that disappeared since 2000 were lost to automation in the decades-long march to an information-driven economy, not to workers in other countries.

Even if those jobs returned, a high school diploma is simply no longer good enough to fill them. Yet rarely discussed in the political debate over lost jobs are the academic skills needed for today’s factory-floor positions, and the pathways through education that lead to them.

Many believe that the solution is for more Americans to go to college. But the college-for-all movement, which got its start in the 1970s as American manufacturing began its decline, is often conflated with earning a bachelor’s degree.

Many high school students rush off to four-year campuses not ready for the academic work or not sure why they are there. Government data show that 44 percent of new graduates enroll directly in a four-year college, but based on recent trends, less than half of them will earn a degree within four years. And though two-year colleges have long been identified as the institutions that fill the job-training role, some 80 percent of community college students say they intend to go on for a bachelor’s degree, or they leave with generic associate degrees that are of little value in the job market.

Students in the United States are offered few feasible routes to middle-skill careers — jobs that require more education than a high school diploma but typically not a bachelor’s degree. The National Skills Coalition, a nonprofit organization, calculates that middle-skill jobs — in computer technology, health care, construction, high-skill manufacturing and other fields — account for 54 percent of the labor market, but only 44 percent of workers are sufficiently trained.“The bachelor’s degree is the gold standard, but the higher education system has to create ways for students to choose training and education in their own time and sequence,” said Anthony P. Carnevale, the director of the Center on Education and the Workforce at Georgetown University. “Higher ed,” he said, “needs to respect the dignity of labor.”

Faced with a skills gap, employers are increasingly working with community colleges to provide students with both the academic education needed to succeed in today’s work force and the specific hands-on skills to get a job in their companies. John Deere, for example, has designed a curriculum and donated farm equipment to several community colleges to train technicians for its dealer network. About 15 to 20 students come through the program at Walla Walla each semester. Because they are sponsored by a John Deere dealership, where the students work for half the program, most graduate in two years with a job in hand. Technicians start at salaries just shy of $40,000, on average.

Dr. Carnevale’s research has found that 40 percent of middle-skills jobs pay more than $55,000 a year; some 14 percent pay more than $80,000 (by comparison, the median salary for young adults with a bachelor’s degree is $50,000).

Jobs like the ones John Deere offers are still associated in people’s minds with students who performed poorly in high school, those considered “not college material.” But to succeed in programs like those at Walla Walla, students need to take advanced math and writing in high school, academics typically encouraged only for those going on to four-year colleges.

Persuading students and their parents to consider the apprenticeship track is a tough sell, especially because companies want students who have a strong academic background.

Struggling to fill jobs in the Charlotte plant, Siemens in 2011 created an apprenticeship program for seniors at local high schools that combines four years of on-the-job training with an associate degree in mechatronics from nearby Central Piedmont Community College. When they finish, graduates have no student loans and earn more than $50,000 a year.

“These are not positions for underachievers,” said Roger Collins, who recruits apprentices for Siemens at 15 Charlotte-area high schools. Chad Robinson was one of those students. Ranked in the top 10 of his high school’s senior class, with a 3.75 grade-point average, he had already been accepted to the engineering school at the University of North Carolina at Charlotte when he told his parents he wanted to shift course and apply for the Siemens apprenticeship. “They were very against it,” he said, until they went to the open house. “A lot of my friends who majored in engineering in college told me they wish they had done the apprenticeship because my work experience will put me ahead of everyone else.”

IT is not uncommon to find executives in Europe who got their start in apprenticeships, which are seen as a respected path to a profession in a variety of fields, from hospitality to health care, retail to banking.

In the United States, on the other hand, apprenticeships have long been associated with the construction trades and labor unions. That can be traced to a Depression-era labor shortage that led Congress to pass the National Apprenticeship Act. The act formalized standards and empowered the Labor Department to certify training, which was mostly in manual labor occupations. Unions took on the task, tightly controlling apprenticeship opportunities and passing them down through the generations.

In the decades after World War II, registered programs expanded in number and type, with the addition of fields like firefighting and medical technician. But apprenticeships never caught on, relegated to a second-class career track as college enrollment ballooned in the 1960s and ’70s, and more recently mirroring the falloff in the influence and membership of labor unions. The Department of Labor’s registry now lists 21,000 programs with about 500,000 apprentices, which sounds impressive but represents only 1.5 percent of 18- to 24-year-olds in this country and is far short of demand. Still, participation is up 35 percent and the number of programs by 11 percent since 2013.

Apprenticeships are making a comeback thanks in part to bipartisan support among lawmakers. In the last two years, Washington has allocated $265 million to spur programs. President Obama’s secretary of labor, Thomas E. Perez, a strong proponent, attempted to rebrand apprenticeships to appeal to educators and parents. During his tenure, the department established a partnership between registered community colleges and sponsors that allowed on-the-job-training to count as academic credit toward a degree.“Apprenticeship is the other college, except without the debt,” said Mr. Perez, who had a goal of doubling the number by 2018.

Advocates are hopeful that the trend will continue with new leadership in Washington, given President Trump’s familiarity with construction.