Higher Education – A better investment than gold

This post is by OK Policy intern Emily Callen. Emily is a senior at the University of Tulsa, where she is pursuing a major in Biology and a minor in Economics. A longtime wonk-in-training, Emily has for years been boring her college friends by quoting statistics at parties. 

Last month, Governor Fallin released her plan  to increase by two-thirds the number of students graduating from Oklahoma’s public colleges and universities. At the same time, some Oklahoma lawmakers and other critics are questioning the state’s spending on higher education, arguing that colleges and universities should face the same budget cutbacks as other areas of government and the legislature should limit tuition increases.

Tuition and fees in Oklahoma remain comparatively inexpensive, but we have not avoided the nationwide trend of rising costs at both public and private universities. We certainly should take this trend seriously and work to ensure college is affordable and accessible to students from diverse backgrounds.

Yet even though the cost is rising, the value of a college education remains very high. Oklahoma should maintain strong investments in higher education for several reasons:

1) College is a solid investment both for students and the state as a whole.

The Hamilton Project calculated that “on average, the benefits of a four-year college degree are equivalent to an investment that returns 15.2% per year.” College outperforms virtually any other investment, from the stock market to government bonds to gold. While the upfront costs of college attendance are considerable and may represent a barrier for many potential students, those who are able to attend college realize substantial gains in lifetime earnings.

Higher education is also a good investment for the state of Oklahoma. Regional Economic Models, Inc. studied the impact of higher education on the state’s economy. The study, performed for the Oklahoma State Regents for Higher Education, estimated that for every dollar the state spends on higher education, $5.15 is injected into the state’s economy. This increased economic activity primarily comes from college and university employee spending and institutional spending on goods and services. Over time, college graduates will earn more than non-graduates, which also boosts economic activity.

Critics of Oklahoma’s higher education system cite the movement of graduates out of the state as evidence of an oversupply of college educated workers. In reality, 78 percent of bachelor’s degree recipients who graduated in 2007 were employed in Oklahoma a year later, and 86 percent of associate degree recipients were employed in the state.

2) Some college is better than no college, even without a degree.

A common target for those critical of higher education is the number of students who begin a college degree program but never finish. According to Complete College America, in Oklahoma less than 10 percent of associate degree-seeking students graduate within two years, and less than 25 percent graduate in four years. Students seeking bachelor’s degrees fare better: 19 percent graduate in four years, and 50 percent graduate within six years.

Low graduation rates are certainly a legitimate concern, especially at regional and community colleges, but there is evidence that students benefit from attending college, whether or not they graduate. The Center on Education and the Workforce at Georgetown University found that, on average, an individual with some college but no degree can expect to earn $200,000 more over a lifetime than someone with only a high school diploma. Even those with jobs that do not require degrees, like plumbers or cashiers, earn more with some college education.

That’s because college is not just about the piece of paper earned at the end. Students also learn to meet deadlines, work collaboratively on projects, broaden their social circles, and make connections that can help them find jobs in the future. They learn new ways of thinking that can help them recognize opportunities in almost any career, even if their classes aren’t focused on specific job skills.

3) The demand for workers with some training beyond high school is expected to rise.

An educated workforce is a public good, attracting businesses to the state and fueling innovation. Employers recognize the value of educated workers, which is why people with more education tend to be paid more. Even if some graduates leave Oklahoma, many more are retained who would have sought higher education elsewhere were it not available in state.

Despite some misguided assertions, Oklahoma is not experiencing a glut of overeducated workers. According to the Center on Education and the Workforce at Georgetown University, “[t]he overall demand for postsecondary education and training will continue to grow. This is true not only of high-tech industries, but even in wholesale and retail trade or personal services, where more than 50 percent of the workforce requires some postsecondary education beyond high school.”

Complete College America projects that by 2020, 59 percent of Oklahoma jobs will require a career certificate or a college degree. Currently, only 30 percent of Oklahoma adults have an associate degree or higher.

The rising cost of higher education remains troubling, and in a future post we will provide some recommendations on how to keep tuition and other costs under control. But in our efforts to control costs, we should not lose sight of the great value higher education creates for all of us.