A professor at Ohio University, Richard Vedder, and an Ohio University student, Christopher Denhart, have tested that hypothesis and in a recent Wall Street Journal article, point out some noteworthy statistics:
- More college graduates work in retail today than there are soldiers in the Army and more janitors with bachelor's degrees than chemists.
- More than 15% of taxi drivers today have college degrees. In 1970, there were less than 1%.
- Since 2006, the cost of college has risen 16.5%, while household incomes have declined.
- Since 2007, the gap between what the median high school graduate earned and what the median college graduate earned has narrowed by ~$1.4k for men over age 25 and ~$1.5k for women over age 25.
- For Americans between 24 and 34 years of age, the earning differential between college and high school graduates fell 11% for men and 19.7% for women (from $18.5k to $14.6k).
- Since 2012, college enrollment has fallen by 1.5%.
Considering these statistics, an increasing number of parents and young adults are deciding that the "reward" associated with a college education is not worth its "cost."
Vedder and Denhart attribute this outcome to three sources:
- the recession and public policy;
- exorbitant higher education spending; and,
- the fact that more high school graduates are being sent to college than professional fields can accommodate.
Simple economics teaches that "actors" will risk their capital given the reward. While Vedder and Denhart argue that colleges must learn to contain costs and measure up to the new benchmarks that exist today to test the worth of a college degree, The Motley Monk foresees the college "bubble" bursting.
How? As parents and young adults identify alternatives that offer greater reward with less risk. This behavior will put tuition-dependent institutions of higher education at very grave risk.
When? It's already underway.
Those so-called "scholarships" that the nation's institutions of higher education award to students are a discount to the "sticker price." (Think: How cars used to be sold.) The margin ("profit") is lowered, yes, but at least there's cash flow to pay the bills.
Next will come downsizing in the number of support staff along with cuts to benefits. Simultaneously, the number of majors and minors will be reduced with only those which attract the greatest number of students ("hot areas") surviving...but for only as long as they continue attracting students.
It used to be that "higher education" focused upon a mental formation that prepared a human being to live a qualitatively more fully human life. The bubble that will burst is the one that has been fueled by the assumption that higher education provides skills training for jobs. That used to be called voc-ed ("vocational education").
Let the discussion begin...
To read Vedder and Denhart's Wall Street Journal article, click on the following link:
"How the College Bubble Will Pop."