University Degrees, Social Capital and Debt (September 3, 2009)
Is going into stupendous debt to attend university "worth it" in terms of social prestige and lifetime earnings?
Correspondent Mark A. recently wrote about the "social capital" benefits of a college degree. In the taxonomy of capital, there is natural resources capital (fresh water, arable soil, oil, coal, minerals. etc.), built capital (infrastructure, equipment, tools, etc.) and social capital: skills, health, social networks, memberships, etc.
Here's Mark's commentary:
From what I can tell (and this isn't my idea - I picked it up from somewhere else) college (not to be confused with graduate education) involves at least three distinct purposes which are rarely differentiated.
Thank you, Mark, for an incisive (and free-wheeling) commentary. I will now add my three cents (if deflation really kicks in, make that one cent).
1. What if earnings don't materialize? A number of readers of my initial post on education costs Is Higher Education Worth a Lifetime of Debt? (August 26, 2009) sent me this story from the New York Times about law students who have mortgaged their future to the tune of several hundred thousand dollars of student loans, expecting to exit law school into the welcoming arms of law firms paying $150,000 a year.
Alas, said law firms have ceased or severely trimmed hiring, and said law students are now facing the prospect of paying off $200,000 loans without said fat $150K per year paycheck.
There is undoubtedly a valuable cache to an Ivy League law degree, and as the pickings get slimmer then those Alpha types who got into Yale, Harvard, Stanford or Boalt already have the necessary skills to navigate the treacherous waters of hyper-competitive law firms.
But being able to do the work is different than competing for a slot in law school or for a position. It is presumed that the same skillsets apply, but they don't. For example, some star architect students make lousy architects.
Although it's far from scientific, a list of the "top" surgeons, physicans and attorneys compiled a few years ago here in the San Francisco Bay Area reflected just this division between credentials and actual real-world skills. Among this list, few attended Ivy League schools.
This is not a slam on the Ivy League, just an observation that not all skills can be taught, even for a price; an unpredictable mix of talent, drive and skill wins out. It may well be that once graduates enter the real world, the differences in talent erode the initial advantage offered by elite university degrees.
As the global economy devolves, then the declining income of all but the very top talent will make those student loans ever more onerous.
Of course this is not an issue for those attending Stanford et al. on scholarships, which is many if not most students; so as long as the endowments don't crater in value, the elite schools are often "free" to coveted students.
Not so lucky are students who paid top-dollar to attend second-or-third-tier private universities but did not exit with the top-tier cache. What is the "value" of their degree compared to much cheaper and reasonably prestigious state universities? Would it be that terrible if some high-priced private universities closed their doors as students balk at paying $150,000 for a modest level of social prestige? Perhaps some price competition would be useful in higher education.
2. The subject matters. We know many young people who graduate from U.C. Berkeley, one of the top public universities in the world and one of a handful of premier research universites (at least until the State of California goes bankrupt). Those who graduate with degrees in rhetoric, English, philosophy (gasp) or other non-technical, non-career path subjects find they are mere mortals upon graduation. With these degrees in hand, you can either go on to graduate school or enter a field where the prestige value of your degree doesn't carry much weight: insurance, retail, etc.
Following Mark's taxonomy of benefits accruing to those with university degrees, we can anticipate that the social "college grad" benefits may actually devolve along with the economy.
3. Social capital and social networks. It's well known that the two young founders of Google received mentoring and key introductions to venture capital sources from their professor at Stanford. Could this have happened at San Jose State, an excellent state university a few miles away from Stanford? Perhaps not, but the professors at San Jose State are definitely plugged into Silicon Valley and students in EE (electrical engineering), network engineering, programming, etc. there have an excellent chance at meeting the "right people" in the Valley by attending SJSU and working in those departments.
On the other hand, Steve Jobs met Woz at the Homebrew Computer Club; neither had degrees. Woz went back to college after he became a millionaire co-founding Apple and earned a dgeree in education.
My point is that social networks and place matter as much or more as the social capital of "membership" in the class of college graduates.
Attending a major university (a big state school, for instance) does confer one potential benefit: it can introduce students to a wider circle of friends and future contacts. High school is often dominated by the torturous navigation of cliques and the burdens of being an outcast. University is about working with groups of people on projects and having to deal with a variety of people in settings where "getting along" is paramount. Those social skills are valuable, especially in a culture which emphasizes "me."
4. The Military/Veterans University Nexus. The same can be said of service in the Armed Forces, too--and the number of people who enter the U.S. Military for a stint and then go on to earn a college degree with their veterans' benefits is extraordinarily large. Indeed, we can posit that the explosive growth in higher education in the U.S. was and is directly correlated to the explosive growth of the Armed Forces in World War II and beyond (from 400,000 service members in 1940 to 15 million in 1945).
Some 1.5 million citizens serve in the Armed Forces and many earn degrees either while serving or after completing their term of duty. This is a "pool" of potential college students whose expenses are largely paid for by the government.
And let's not forget the enormous funding for research (and thus grad students) which flows through Pentagon departments like DARPA, ONR (Office of Naval Research), etc.
5. Establishing goals and purpose. In an economy with fewer job opportunities for young people, then college has two distinct advantages: it removes millions of people from the job pool, albeit temporarily, and it offers students a purpose and goal in life at the very point many are drifting and aimless.
Is a Bachelor's degree worth $150,000? In any rigorous cost-benefit analysis, the answer will probably be no. Is it worth $25,000 in social capital, networking, "membership" and the additional four years of learning how to learn? The answer is "yes" unless other opportunities present themselves which offer even higher payoffs for four years of labor and the $25K invested.
Lagniappe thought: if you're a real workaholic, then you can work while attending university and actually learn practical skills at the same time. I exited college with a "worthless" degree in philosophy but two years experience as a carpenter/helper. I already knew how to hang drywall, finish concrete, frame houses and much else relating to construction (digging a nice deep straight ditch, for instance).
Which is just another way of saying, if you have some employment opportunity, then it is possible to take it and earn a college degree "on the side" for the fun of it or for the potential "social capital."
After all, learning isn't just about earning a "membership"--it's also great fun.
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