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Is a college degree a better investment today than 50 years ago?
Old 07-21-2014, 08:58 AM   #1
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Is a college degree a better investment today than 50 years ago?

Hi! I read an article by Joseph E. Stiglitz today in which he claims the following:

"And with wages of those who have only a high school diploma at 62 percent of the typical college grad’s earnings—compared with 81 percent in 1965—the prospects are they will be poorer than their parents."

Here's a link to the article: The Myth of America’s Golden Age - POLITICO Magazine

Of course this doesn't take into account the costs of a college education, but I'm surprised to see that the pay gap between employees with college- vs. high school degrees has grown so much in the last 50 years.
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Old 07-21-2014, 09:10 AM   #2
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I would imagine the gap growing is largely due to a vanishing factory workforce that received very good wages for jobs that required only a high school diploma (if that).
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Old 07-21-2014, 09:15 AM   #3
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A college degree is still a good "investment," provided like any other investment, you are buying a quality education for the right price.

As an initial matter, the college applicant needs to decide what s/he wants to study. If unknown (as in most cases), it's better to consider a public university that offers a wide range of majors from which to choose. While some may disagree with this, a private liberal arts college (likely at 3x the tuition) is not a good investment for someone to discover their "life's work." If a private liberal arts college is appealing because of small class sizes, more interaction with professors, etc... then a community college is a more sound investment. A student can always transfer after two years, receiving a diploma from a top 4-year school upon graduation. Other other hand, if the college applicant knows what s/he wants to study (often uncommon), then picking a public university known for that area is a good investment.

A major caveat to the foregoing is the opportunity to buy a "blue chip" college education through one of the Ivy League schools, or from a top university outside the Ivy League. While the tuition may be high, the network that can be built from four years at one of these universities may be worth hundreds of thousands of dollars (possibly millions) over a career.
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Old 07-21-2014, 09:34 AM   #4
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I wonder how much of this gap is due to the increasing gap between top level employees vs. low wage earners. I think trade craftsmen do pretty well compared to a fairly typical college grad worker, but the gap between a McDonalds counter worker and a McDonalds Corp exec has skyrocketed in 50 years.
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Old 07-21-2014, 09:40 AM   #5
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"And with wages of those who have only a high school diploma at 62 percent of the typical college grad’s earnings—compared with 81 percent in 1965—the prospects are they will be poorer than their parents."
Part of that is the wholesale loss of good jobs that didn't require college. These days many jobs that never used to expect college are demanding it now. Also, there is a growing gap among college graduates depending on major. You used to be able to get a decent job with degrees in the arts, humanities and social sciences and receive OJT to get the specific job training, but not any more. Now you have to have the *right* degree.

I would say a math/science/engineering degree at a cheaper state school is still an outstanding investment. A private school degree in the arts and humanities, probably not so much. But there are more reasons to go to college than *only* to get a high paying job. (But if you have to go deep into debt for an art history degree, for example, it's probably unwise financially.)
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Old 07-21-2014, 02:06 PM   #6
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Hi! I read an article by Joseph E. Stiglitz today in which he claims the following:

"And with wages of those who have only a high school diploma at 62 percent of the typical college grad’s earnings—compared with 81 percent in 1965—the prospects are they will be poorer than their parents."

Here's a link to the article: The Myth of America’s Golden Age - POLITICO Magazine

Of course this doesn't take into account the costs of a college education, but I'm surprised to see that the pay gap between employees with college- vs. high school degrees has grown so much in the last 50 years.
Probably the main culprit is the disappearance of those well-paid unionized manufacturing jobs. It's not that people with four year degrees make a lot more than they used to, but that the people with only HS diplomas make somewhat less.

Also, the average college grad today probably has more years of school than the average college grad 50 years ago.

From an individual student's perspective, it's very much a matter of which degree and which school and particular individual characteristics.

And, of course, note that a correlation does not prove causation. Some of those college grads would have done better than the average HS grad even if they had never stepped foot on campus.
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Old 07-21-2014, 02:57 PM   #7
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It's not so much that a college degree is a good investment … it's that lack of a college degree is worse now than it was 30 to 40 years ago.

Many colleges are just glorified high schools anyways. Soon there will be even more reports of "lack of a decent college degree" versus "a college degree from a well-regarded college or university." Many of these 3rd and 4th tier colleges will go bankrupt or get folded into better private and state flagship universities.
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Old 07-21-2014, 03:19 PM   #8
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My take on college (I have a daughter who will be a HS senior beginning next month, so I'm knee deep in it these days):

1) I am very PRO college. That is, if the potential student is college material. If a kid wants to be a plumber or a chef or a makeup artist, then they need to go do that and likely not bother with college, because after all, the MAIN reason for going to college is to become educated so that someone will hire you (or you can start a business with this new knowledge).

2) The best thing a person can do to afford college is to get excellent grades. Not only does this qualify you for some serious scholarship money (including complete full ride), but if you can get into one of about 60 colleges that provide 100% full need, you can afford to pay for some of the most elite colleges in the country. You can find a list of the colleges that provide 100% need on line. Here's a good list - Colleges That Claim to Meet Full Financial Need - US News - most of these schools are VERY hard to get into which is why you need to do well in high school.

3) If your family makes $60,000 or less, you can qualify for a Questbridge scholarship which provides college for free to you.

4) If you are neither not poor nor rich, you can do a few things...go to community college first, go to a cheaper college and live at home, or even go part-time while you work.

5) I believe that unless you have clear plans that don't require college and you have the ability to go to college and graduate, that you do so. I think it is also preferable for MOST students to live on campus if at all possible. Lots of growing up happens when you don't live at home anymore.

6) Finally, in most cases, college is absolutely worth it. Yes some will make a ton of money without college degrees, and some will make very little with them, but overall, it is better financially to have a college degree than to not.
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Old 07-21-2014, 04:04 PM   #9
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I agree the move from a manufacturing economy that was more common 50 years ago is probably a main factor in the decline of HS diploma avg wages. Being more service based economy now you must have some skills that an employer is willing to pay you for. Be that with a college degree or a trade school certification or other, you need something beyond a HS diploma.

I even think that a std bachelor's degree does not carry the importance or income potential it used to 50 years ago. It seems that a BS 50 years ago is kind of like a MS now, for example.

The quality of the college investment is a direct function of the cost of that college and the employment and income prospects that degree can provide. State university and a major with good job outlook at higher income is a better "investment" than a more expensive school and major with poor job and income potential. The former has a higher payback, making it a better investment.
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Is a college degree a better investment today than 50 years ago?
Old 07-21-2014, 04:49 PM   #10
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Is a college degree a better investment today than 50 years ago?

Did I not read the link correctly? It had almost nothing to do with college being an investment, but was a 2 page article on why the rich are getting richer and the poor guy is getting screwed.


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Old 07-21-2014, 05:44 PM   #11
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When I was growing up in Gary during its own smog-choked “golden age,” it was impossible to see where the city was going. We didn’t know, or talk, about the deindustrialization of America, which was about to occur. I didn’t realize, in other words, that the rather grim reality I was leaving behind was actually as good as Gary was ever going to get.
I'd be willing to bet big money that Prof. Stiglitz is dead wrong in this statement. By any objective measure life expectancy (60s era smog was pretty deadly), home ownership, number of cars own, size of house, educational achievement, medical care, diet, labor saving home appliance yada yada, the residents of Gary Indiana are better off now than when the Professor left in 1960.
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Old 07-21-2014, 06:05 PM   #12
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I'd be willing to bet big money that Prof. Stiglitz is dead wrong in this statement. By any objective measure life expectancy (60s era smog was pretty deadly), home ownership, number of cars own, size of house, educational achievement, medical care, diet, labor saving home appliance yada yada, the residents of Gary Indiana are better off now than when the Professor left in 1960.

For the first time in my life I get to drive by that town, tomorrow. All I know is what I have heard about it through the news. And let's just say I think I will be better off by not being low on gas when I drive by.


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Old 07-21-2014, 06:23 PM   #13
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The quality of the college investment is a direct function of the cost of that college and the employment and income prospects that degree can provide. State university and a major with good job outlook at higher income is a better "investment" than a more expensive school and major with poor job and income potential. The former has a higher payback, making it a better investment.
I agree in general, but it's not always the state college that is cheaper. I know a girl who will begin at Princeton University in the fall...one of the very best universities in the world, and she will go for no cost due to her family's income. Ivy League schools do not give athletic or academic scholarships...only based on income, and if you make less than about $60,000, you go for free if you get in...free including room and board. It would cost her money to go to most state schools.
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Old 07-21-2014, 08:11 PM   #14
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I'd be willing to bet big money that Prof. Stiglitz is dead wrong in this statement. By any objective measure life expectancy (60s era smog was pretty deadly), home ownership, number of cars own, size of house, educational achievement, medical care, diet, labor saving home appliance yada yada, the residents of Gary Indiana are better off now than when the Professor left in 1960.
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For the first time in my life I get to drive by that town, tomorrow. All I know is what I have heard about it through the news. And let's just say I think I will be better off by not being low on gas when I drive by.
Good plan Mulligan.

clifp - you might be right in general terms, but talking specifically about Gary, I'm not so sure. Gary has been hit hard.

from wiki:

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Gary's fortunes have risen and fallen with those of the steel industry. The growth of the steel industry brought prosperity to the community. ... Department stores and architecturally significant movie houses were built in the downtown area and the Glen Park neighborhood.

In the 1960s, like many other American urban centers reliant on one particular industry, Gary entered a spiral of decline. Gary's decline was brought on by the growing overseas competitiveness in the steel industry, which had caused U.S. Steel to lay off many workers from the Gary area. As the city declined, crime increased.

.... As of 2013, the Gary Department of Redevelopment has estimated that one-third of all homes in the city are unoccupied and/or abandoned.[11]
-ERD50
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Old 07-21-2014, 09:32 PM   #15
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I think college is still a good financial deal for many, as long as the degree leads to likelihood of a reasonably high paying job. And assuming you aren't paying $200,000+ for a bachelor's degree.

Looking at the two universities I attended, tuition+fees are a few bucks over $8000 per year, with the total "cost of attendance" for 4 years just under $100,000 total. Amortizing that $100,000 over a working career where you can raise your salary by $10-20k per year would make it still a good deal to go to college (even paying full price). And who pays full sticker price at college?

Perhaps an honest calculation would have to include 4 years of forgone earnings and 4 years of gaining experience in a non-college degree field. For example, one could be an electrician, lab tech, plumber, etc with 3 years experience (assuming a 1 yr community college program + 3 years working) at age 21 or 22, whereas the college grad would have zero years experience (barring relevant internships or co-op).

Then again, students can work during college and especially during summers. I found it was easy enough to make decent money in part time and summer jobs about 2 years into a STEM degree. Like $13-18/hr back around 2000.

As for the argument that college is an even better bet now than 50 years ago? Hard to say. Many jobs do require a four year degree of any type just to qualify for somewhat menial work. See, for example, state government. I knew a lot of ladies (yes, they were all ladies) that started in state govt ~30 years ago in the typing pool, and worked their way up to admin assistant or "office manager" type roles without any college degree. They require 4 year degrees for admin assistant positions now.
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Old 07-21-2014, 09:56 PM   #16
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For the first time in my life I get to drive by that town, tomorrow. All I know is what I have heard about it through the news. And let's just say I think I will be better off by not being low on gas when I drive by.
The murder rate in gary IN is 46/100k down from a peak of 80/100k in 2001.

I looked up the cities where I have lived: Toronto 2/100k, San Jose 4.6/100k, Los Angles 7.8/100k, Irvine 0.5/100k.

Even place like east palo alto, oakland, compton are only 20-30/100k.
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Old 07-22-2014, 12:19 AM   #17
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Good plan Mulligan.

clifp - you might be right in general terms, but talking specifically about Gary, I'm not so sure. Gary has been hit hard.

from wiki:



-ERD50
Doing a bit of google work you are probably right economically Gary has been hard hit, I passed through the town briefly in the late 60s at age 9 and it wasn't tourist destination even then.

Still in somethings like educational achievement, and health it probably better off now than 1960. For example 82.4% have a high school diploma and 12.4% graduated college national averages were 45% and 8% back in 1960.
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Old 07-22-2014, 05:48 AM   #18
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Did I not read the link correctly? It had almost nothing to do with college being an investment, but was a 2 page article on why the rich are getting richer and the poor guy is getting screwed.
Sorry if you feel misled. My question was about one specific quote from the article, which I included in my OP. I provided the link because I have been taught to quote my sources correctly.
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Old 07-22-2014, 06:10 AM   #19
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The murder rate in gary IN is 46/100k down from a peak of 80/100k in 2001.

I looked up the cities where I have lived: Toronto 2/100k, San Jose 4.6/100k, Los Angles 7.8/100k, Irvine 0.5/100k.

Even place like east palo alto, oakland, compton are only 20-30/100k.
I had to google that to put it into perspective. Wow, even the Central African Republic, a failed state with a life expectancy of 45 years, is at 29.3/100k.
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Old 07-22-2014, 06:23 AM   #20
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Still in somethings like educational achievement, and health it probably better off now than 1960. For example 82.4% have a high school diploma and 12.4% graduated college national averages were 45% and 8% back in 1960.
[emphasis mine]

I was astonished by those numbers, but you are indeed right. Still, these figures are strongly distorted by birth cohorts born before WW2.
Starting around the birth year 1940, 80%+ of US citizens graduated HS.

Source: http://www.russellsage.org/sites/all...chievement.pdf , page 2.
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