Most stories about higher education in the media focus on rising cost and spiraling debt. Here's a new twist -- recent data show that more young Americans are completing college than ever before, according to NYT. To economists this is not surprising for two reasons. First, despite the attention given to tuition and fees, the biggest cost of college for most young people is lost earnings. Time allocated to school is time that could have been allocated to a job. In a down economy, the lower odds of getting full time employment reduce the lost earnings cost of school attendance.
Second, the economic gap between those with college degrees and everyone else remains massive. The best paying jobs continue to require college degrees. Recently, many customer-facing jobs that do not require college skills for the actual tasks involved (think hotel desk clerk) nonetheless require college degrees because employers believe that college graduates have better communication and organizational skills. Growing use of information technology and statistical quality control also is driving the trend.
A continued increase in college attendance and completion rates would result in an increase in GDP and productivity, as well as a reduction in income inequality as the supply of low skill labor shrinks relative to that of highly skilled labor. In other words, a win-win for the economy!
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