RISING TO THE CHALLENGE: MT. EVEREST AND COLLEGE

It’s not the mountain we conquer, but ourselves. ~ Sir Edmund Hillary 

There’s a straightforward relationship that explains both the horrendous end of Mt. Everest’s spring climbing season this year and the added challenges increasing numbers of students face of graduating from US colleges. These two trends in one sense display a victory for the marketing of these arduous “projects” to a larger, broader public that’s not completely ready for them. In cold economic terms, it’s consumer demand exceeding available supply. But at what cost? Deaths and drop-outs.

The recent deaths on Mt. Everest have once again peaked the media’s interest. The adventure media while berating the agonies of defeats and deaths fawns over the thrills of the quest each and every season.

Why has this season seen 11 climbers die on the mountain, the most since 2015 when at least 22 people perished due to avalanches? There were 5 deaths last year. For a change, it wasn’t this year’s weather or earthquakes or avalanches. It was because climbing Everest has for some time been commercialized and sold as something folks beyond just the hardest of hard-core, capable alpinists can successfully attempt. Nepal’s tourism ministry, seeking hard currency, issued permits to summit Mt. Everest to a record 381 climbers this season, at a cost of about $11,000 each. Beyond the permit, the trip itself can cost $45,000 or more.

That’s a very long way from Sir Edmund Hillary and Tenzing Norgay’s initial ascent 65 years ago. According to veteran mountaineers, this year there have been too many inexperienced climbers who have bought their way into attempting Mt. Everest who haven’t been adequately trained or supported. Dreadful results have precipitated. These results were created in no small part because of the sheer numbers of climbers attempting to simultaneously reach the peak, shown in the picture below. This is what it looked like last week when too many people (probably over 200) were waiting to capture their moment of glory on the narrow, cold (-13^oF) confines of the summit at 29,029ft. Fascinatingly, Mt. Everest continues to grow about 0.25” each year. With the extended wait, often two hours or more, unprepared climbers can run out of oxygen among other life-threatening challenges.

The summit jam at the top of Mt. Everest, May 2019.

Source: Getty Images via The Washington Post.

Meanwhile back in the lowlands, more than 16.8 million undergraduates traversed the academic slopes at colleges and universities last fall, representing a 27.8% increase since 2000. The number of US adults that have a B.A. or higher degree has increased 36.7% since 2000.

For decades, post-high school academic education has been proclaimed by many authorities, including educators and politicians, as the very best way of ensuring career success. Students and their families have listened and acted on this advice. In 2018, 35% of US adults have received a B.A. or higher degree. This proportion of college-educated adults has never been higher, as shown in the chart below. College enrollment has been increasing for young adults for over a century. This is a very good thing because a more educated, skilled workforce is more productive and more engaged. This achievement reflects not just individual successes but collective ones that have benefited society.

Percent of US adults with a B.A. or higher degree

 Source: NCES.ed.gov 

This chart illustrates that the growth of adults having at least a B.A. degree follows a logistic curve during the nearly 90 years shown. From the 1970s through 2000, the percentage of adults with college degrees rapidly increased; it more than doubled. After 2010 the incremental increases in adults with a college degree are smaller than before. This is expected to continue. The total number of undergraduates enrolled in US colleges peaked in 2010, at 18.1 million.

There are certainly sound reasons why growing numbers of young adults have elected to follow the college pathway to hopeful success. One reason, beyond possessing increased knowledge, is being able to receive higher compensation at work. In his superb Kenyon College commencement speech, This is Water, David Foster Wallace offers a much different and appropriately broader perspective when he stated, "It is about the real value of a real education has almost nothing to do with knowledge, and everything to do with simple awareness; awareness of what is so real and essential, so hidden in plain sight all around us, all the time, that we have to keep reminding ourselves over and over: ‘This is water.’”

The median annual earnings of young adults with a B.A. were $50,000 in 2016. The college income premium is often used as a justification for those of us who are fiscally-focused. It offers a rationale for devoting the considerable time, effort and expense required to receive a B.A. Several studies that have examined the size of the college income premium have found that it has ranged from about 70% to 100% more than income earned by people without a college degree. This premium has neither grown nor fallen very much over the last two decades; it’s plateaued. Other studies imply that the premium may have started to decline for specific cohorts of college students.

What has grown are college tuition and fees, which have greatly climbed for two reasons. First, states have provided a much smaller proportion of public university budgets; and second, the demand for an A.A. or B.A. degree has increased significantly. It’s been a sellers’ market for a long time, especially at “selective” schools. Since 1978, college tuition and fees have increased more than three times as fast as consumer goods and services’ prices have. Student debt has consequently risen; 69% of all college students have taken out at least one loan; the average loan owed is $29,800; the median monthly payment is $222.

I don’t think this necessarily comports as a general, capital “C” Crisis that’s often mentioned in the media. Student debt has increased because a lot more students have chosen to go to college. It’s principally demand-driven. Student debt that enables earning a college degree eventually provides added value to each and every student who graduates, as mentioned above. But defaults on student debt are the highest by a large margin of any type of private debt, especially for students who don’t graduate.

Entering and thriving in college, like climbing Everest, is not for the unprepared. As more and more students are going college, more have found it difficult to summit the academic mountain facing them. According to one report, anywhere from 40% to 60% of first-year college students now require remediation in English and/or math. These remedial courses cost students crucial money – about $1.3 billion each year. Also, these courses don’t count towards graduation requirements. On-time graduation rates of students who take remedial classes are consistently less than 10%. Basically, remedial education in college represents a deep crevasse into which all too many students are unlikely to emerge. The “who’s responsible for this” fingers are pointed in many directions regarding why this increased level of needed remediation has occurred and, of course, who should pay for it. More remediation is needed.

Today’s first-year entrants into college are more broadly representative of all our young adults, rather than a much narrower slice of them in decades gone by. This breadth is requiring more support services on the part of colleges and secondary schools, and more determination on the part of these students. Students who have the required determination and available resources graduate. But a lot don’t.

The travails of our ever-increasing number of college attendees have also risen, with only 40.7% graduating within four years across all US post-secondary educational institutions. For-profit schools’ graduation rate is contemptibly much lower, only 17.6% which is less than one-third the rate for non-profits.

Interestingly, there were several for-profit colleges named after the Earth’s highest peak. Unfortunately, none of the Everest Colleges ever reached high-altitude academics. Their owner/operator, Corinthian Colleges Inc., was successfully sued by the State of California in 2016 for defrauding their students. Everest College graduates have legitimately expressed concerns that their Everest degrees are effectively worthless. If colleges like Everest have been offering worthless degrees, perhaps they should be removed from the education business.

Higher education in the US now is far different than it was even 20 years ago, let alone in the more distant past. When I graduated from college, just after the Iron Age, having a B.A. was quite extraordinary, just one-in-ten adults received a B.A. or higher degree.

Neither the industrial-education complex, nor politicians, nor young people will allow a return to even the 2000s, when just one in four young adults graduated with a B.A. Now it’s one-in-three, which sounds like a small change, but it most assuredly isn’t. Getting a college degree has never been so culturally and socially hard-wired into our successful futures. Some folks even believe it’s a right, rather than an option. Go figure. For now and forever-more, returning to the recent past isn’t going to happen in terms of college access, and shouldn’t. And there are consequences when college degree holders become ever more widespread and less extraordinary.

Student loans have always been subsidized, reflecting the positive externalities associated with being a college graduate. Recently, several Dem presidential hopefuls have proposed increasing these subsidies in several ways. I do not think we should adopt policies like free public university that consequently will incent even more high-school grads and others to enter colleges. Visually think of such programs’ aftereffects as similar to the above picture of the overly long queue of cramped climbers waiting for the momentary grandeur of summiting Mt. Everest. Instead, multitudes of additional college students will be waiting and waiting not only to get into already-filled classes, but also to find a place to sleep and eat. Will these additional collegians, who would not have otherwise applied if it weren’t “free,” be adequately prepared academically? I have my doubts.

Policies like those Bernie and Elizabeth have been pushing for “tuition-free” and “debt-free” college are a doomed fantasy without also dramatically increasing public colleges/universities’ federal funding for expanded faculty, facilities and especially for remediative programs. If such free college programs were to see the light of day, listen for the anguished cries of progressives who whine that such policies will end up subsidizing un-poor people, mon dieu how inequitable! Such expensive, expansionary programs are likely to devalue the worth of attaining a college degree and increase drop-out rates. An A.A. or B.A. would become less exceptional and more normal. More eateries, and other businesses, would begin requiring wait-person jobs to have a post-high school degree. At best, smaller wage premiums would be willingly paid for such normality, just like when high-school degrees became ordinary starting in the 1970s; 55.2% of US adults had a high-school diploma in 1970. So, regarding “free college;” be careful what you wish for.

As Sir Edmund stated, it’s not a real adventure when you have to pay for it. Nevertheless, here’s to prepared adventuring in high places and higher education.

POMP AND CIRCUMSTANCES: Five decades after college

Cauliflower is nothing but cabbage with a college education. ~ Mark Twain

How could have it been this long, 50 years since I graduated from college? My how time really flies.

Now that I’ve reached my Baccalaureate’s golden anniversary I decided to explore how our economy and its college graduates can be compared during the 50 years since June 1967 when I received my B.A. degree in economics. I assess the current economic circumstances that the graduating Class of 2017 is about to inhabit with that of my graduation. I also have examined the economic landscape in June 1971, when I (finally) entered the full-time work force having completed my Ph.D. course work and much of my dissertation.

Here’s a minor insight I gained from this inquiry. In looking back at my college transcript – no, it wasn’t on papyrus – I re-discovered that my college senior thesis and five years later my doctoral dissertation both examined aspects of the economics of technological innovation, a topic that’s still of personal interest.
Can there be a golden reunion of sorts between my Class of 1967 and the Class of 2017? Let’s see…

First, here is some basic information regarding the impressive accomplishment of increasing our educational attainment. Chart 1 below shows the ever-growing percentage of adults who have received a B.A. or more during the past century. In 2015, the latest year available, 32.5% of adults had a 4-year college degree or more and 88.4% had a high-school diploma. In 1967, 10.5% of us had received a B.A. or higher degree. In 50 years we’ve tripled the share of adults who have college degrees.  

Chart 1: Percent of US adults who have a B.A. or higher degree

Source: NCES.ed.gov. Adults are defined as people between 25 and 64 years.

 An interesting perspective on the current level of degree-attainment is the percentage equivalence between the high-school graduation share in 1950 and college graduation in 2015. The percent of adults who have at least a B.A. in 2015 (32.5%) is in a way comparable (and up an educational notch) to 1950, when 34.3% of adults had a high-school diploma. In 1950, the bulge of American GIs who benefited from the federal government paying for much of their post-high school education had started completing college. People with a B.A. or more in 1950 represented 6.2% of adults. In 1971, about 11% of adults had a B.A. or more.

Table 1 shows the breakdown of college graduates by gender for the three years I have focused on.

 Table 1: Adults who have completed four years of college or more, by gender

Year	Men / Women with a B.A. or more(% of US population)
1967	12.8% / 7.6%
1971	14.6% / 8.5%
2015	32.3% /32.7%

Source: https://www.statista.com 

As shown, in 1967 almost twice as many men received degrees as women. Between 1967 and 2015 the percentage of adults with a B.A. or post-graduate degree more than doubled for men and more than quadrupled for women, a notable feat for improving the nation’s human capital and enormously benefiting America. Each year, women now account for more college degree-holders than men.

Table 2 summarizes macroeconomic conditions in the US for these three graduation years. 

Table 2: US Economy in three graduation years

Year	Real GDP (billions 2009$)	Real GDP Growth	Employment* (millions)	Unemployment Rate**	Inflation Rate (CPI)+	US Average Annual Earnings++
1967	$4,355.2	0.3%	65.89	4.0% ↑	2.8%	$5,907 ($43,246)
1971	$4,877.6	2.3%	71.25	5.6% ↓	4.3%	$7,530 ($44,780)
2017	$16,842.4	0.7%	146.06	4.4% ↓ (2.4%)	1.8%	($45,677)

*All employees: total nonfarm payrolls.  ** ↑ indicates increase in rate from previous month; ↓ indicates decrease from previous month; in parentheses, unemployment for people with a B.A. or higher.  + 2017 inflation based on CPI change from 2015Q4 to 2016Q4.  ++ Average annual real earnings in parentheses (2017$).

Source: BEA, BLS. If available, I used June data for each year. 
You can see that real GDP almost quadrupled from 1967 to 2017 and that that real GDP growth was lowest in 1967, an unimpressive 0.3%. The June 1967 unemployment rate also was the lowest. Even though the 4.0% unemployment rate had increased marginally from the month before, 790,000 more people were added in June 1967 to the employed, nonfarm labor force. Using today’s economic thinking a 4.0% unemployment rate would signal robust full employment with a solid likelihood of inflation around the GDP corner. Yet the annual inflation rate in 1967 was a relatively mild 2.8%. Real GDP growth was far stronger when I entered the full-time labor force in 1971, 2.3%, although the 5.6% unemployment rate was the highest of any of the three years. The 4.3% inflation rate also was the highest of these three years. What wasn’t high during the four year period between 1967 and 1971 was the increase in average annual real earnings that grew less than 1% per year. It increased even less during the 1971-2017 time period. Despite this miniscule income growth, the US was not in a recession during any of these three years.

The Class of 2017 faces an economy that’s expanding, at an all too modest rate (0.7%), with a declining unemployment rate and very modest inflation, 1.8%. The unemployment rate for all people with at least a B.A. is much lower than the overall rate, just 2.4%; although the unemployment rate for young adults (21-24 years) with a college degree was 5.6%. The income of young college graduates has recovered to about $40,000. These economic descriptors sound quite encouraging for the Class of 2017; certainly when compared to seniors who graduated in 2007 and soon thereafter during the lingering Great Recession. This year 21% of the class of 2017 accepted a job before graduation, up from 12% last year and 11% two years ago according to Accenture.

Nevertheless, there are qualifications to this year’s good news based on two factors. First, there are now more young adults with B.A.s seeking jobs than ever before. This steady increase in B.A.-holders first began in earnest in the 1980s, as shown in Chart 1. In 2017, 1.9 million college students are expected to graduate. Having a college degree has become much less exceptional than it was in the 1960s, 1970s or 1980s. Now, it’s increasingly seen as necessary, not optional, for securing a brighter economic future. This surge in college-educated labor in part has allowed employers to “up-credential” certain entry-level jobs, meaning employers have been able to specify that job applicants require a college degree, where before the job didn’t require a B.A. credential. Of the more than 11 million jobs were created since the last recession, almost 75% of those positions have been filled by people with at least a B.A. degree.

A second factor is persistent, historically-low economic (GDP) growth, shown in Table 2. As I’ve mentioned before, US macroeconomic growth remains rutted well below 3% since 2006. Lower growth produces fewer new jobs for everyone looking to be employed, lower labor-force participation and slackened wage increases.

Beyond up-credentialing, underemployment of recent college graduates has risen and includes 43.5% of college graduates ages 22 to 27 who are working at jobs that don’t even require a college degree. Employment of non-white college graduates remains even more problematic.

With the sizeable number of college grads working in “non-college” jobs, the employment prospects for recent high school graduates have become doubly-difficult. High school graduates’ unemployment climbed to 16.9%, one percent higher than in 2007; their average income is $22,600.

The properly-vaunted college wage premium has been one often-cited motivating factor for increased college attendance during the past decade. According to a recent NBER paper the college wage premium has levelled-off. The wage premium between the average annual income of B.A. holders and of high-school degree holders, remains large (about $27,000 per year), but its growth has dropped significantly since 2010. Between 2010 and 2015 the increase in this premium only grew 0.4%; between 2000 and 2010 it was a much larger 25.2% gain. I expect this wage premium will continue to decay as college attendance rises and low growth persists.

If this trend persists, it will be very challenging for new college graduates because these grads have taken on ever-larger student loans in order to cover their ever-increasing college costs. The most recent information states that 71% of students graduating from four-year colleges have student loan debt. College attendees and graduates now owe $1.4 trillion on their student loans. The average monthly student loan payment is $351 for 20 to 30 year old borrowers. Student loan debt has increased the most rapidly of any debt type (e.g., mortgages, car loans, credit cards) during the past decade. It doubled both as a share of total consumer debt and in dollar amount since 2007. Student loan debt now accounts for 10.6% of all consumer debt. To add fiscal salt to these debt wounds, students’ ability to pay has withered. The average income of B.A.-holders increased a meager $915 from 2010 to 2015, a paltry 0.3% per year.

The president’s more-detailed budget for the next fiscal year was submitted to Congress on May 23. In it he proposes to cut student loan funding and subsidies by $143 billion. That may save some cents, but it does not make sense.

Until more robust economic growth re-appears, the Class of 2017’s economic prospects will be far less buoyant than those of our Class of 1967 were. Despite the president’s pledges for higher growth, it’s unlikely to occur any time soon. His policies don’t support it. Many economists rightly believe his visions of sustained 3+% growth is a fantasy. Greater macroeconomic growth depends on two principal sources, higher productivity and higher work-force participation, neither of which has risen much if at all lately. None of the president’s hazily-stated policies will positively affect productivity or work-force participation.

In many economic respects it was relatively better for us 50 years ago as newly-minted graduates in the Class of 1967. QED, the Summer of Love, complete with embroidered bell-bottoms, and beyond. But it is worth remembering from a broader, life perspective that recent college grads very fortunately haven’t had to worry, as we did, about General Hershey and local Selective Service Boards (which, to this day, still require men to register at age 18) drafting us as young graduates, then donning a uniform and heading into the jungles of Viet Nam. As they fling their mortarboards in the air, the challenges facing the Class of 2017 thankfully have nothing to do with tropical war zones. Here’s to more pomp and less circumstances.

PUBLIC UNIVERSITIES ARE CAUGHT BETWEEN HOBSON AND A HARD PLACE

The whole purpose of education is to turn mirrors into windows. ~ Sydney J. Hams 

These are roiling times for our vast edu-industrial complex – public and private colleges and universities and their attending students. Even the most renowned public universities are being tested, as a new batch of freshman will soon enter their hallowed halls.

The prestigious University of California (UC) system, founded in 1868 in Berkeley, has over 238,000 undergraduate and graduate students going to its 10 universities throughout the state. More than 71,000 freshmen will begin classes at UC later this month and next month. Echoing the formidable challenges facing public colleges-universities, UC President Janet Napolitano said several months ago that because of substantial budget cuts, nearly every state university in the nation had been forced to make a “Hobson’s choice, and they all have reached the same decision: Open doors to out-of-state students to keep the doors open for in-state students.”

Her use of the phrase “Hobson’s choice” to characterize her difficult job is interesting. Thomas Hobson was a 17th century livery stable owner in Cambridge, England who had over 40 horses for rent. Having so many horses made it appear to customers that they had many choices available to them. But there actually was only one choice, because Hobson required his customers to choose only the horse in the stall nearest the door, so his best mounts would not be overused by perceptive customers. Hobson’s choice has thus come to mean a situation in which you are supposed to have a choice but really do not have any choice because there is only one thing you can really have or do.

Thomas Hobson is alive and well at virtually every public college-university. Over the past several decades California and many other states have substantially reduced the amount of public funding they provide their universities – 40 years ago UC received 32% of its budget from the state, now less than 16% is provided.

As usual, legislators wanted it both ways; cut higher education funding and suffer no negative consequences. But there have been predictable consequences, tuitions have risen (to replace the lost public funding) and the composition of students has changed (to increase revenue). In order to garner more income universities have made their Hobson’s choice and raised tuitions and accepted more out-of-state students, who pay far more tuition than in-state students. In the case of UC/Berkeley, the 2016-17 tuition for in-state students is $13,500/yr, out-of-state tuition is $35,850/yr. Unsurprisingly, ever-rising tuition has created headwinds for students, universities and politicians.

In-state students and their parents have been none too pleased that universities have raised tuition and are accepting more out-of-state students – this fall, 32% of UC/Berkeley admitted freshmen are either from out of state or other nations. After a series of public protests California legislators, Ms. Napolitano and the UC Board of Regents had several discussions. UC agreed to reduce the number of out-of-state students and increase the number of in-state students in return for receiving more state funds.

Everyone agrees that US colleges and universities have long produced storied and positive benefits for our society and their graduates. This is why going to college has been an essential ingredient for attaining the “American Dream.” Over the past century the ranks of baccalaureate (BA) degree holders have increased spectacularly, as shown in the figure below. People who have a BA now represent 34% of young adults, more than a ten-fold increase since 1905, when my grandfather graduated from college. Having a BA is fast becoming the new norm rather than the exception for young adults.  In 2013-14 more than 2.7 million adults graduated from a 2- or 4-yr college.

Source:  National Center for Education Statistics.

This dramatic, continuing upsurge in people receiving BAs is creating challenges for more recent college graduates. Their Associate or Baccalaureate degrees may not be worth as much as they were decades ago when just 10% or 20% of young adults earned a BA.

The law of diminishing returns, first posited in the 18th century, applies to college grads as well as other productive inputs. As more of any given input (like skilled, BA-holding workers) are added to the productive work force, their incremental contribution (“return”) to output will diminish. This is beginning to happen for college graduates. But not just the returns from a college degree are weakening.

With ever-more young people (and their parents) demanding a 2- or 4-college education, the costs of attending college have risen significantly, in part reflecting the relative insensitivity of costs to levels of demand. In economic terms, college attendance seems fairly price inelastic, especially for “selective” colleges. Thus, the expense of going to a public college-university has increased 94%, after adjusting for inflation, during the past 15 years; for private colleges-universities the increase is 46%. And yet even with these substantial cost increases, college attendance has skyrocketed to 20.2 million (M) in 2015 from 15.3M in 2000, an increase of 32%. Faced with more demand for their product, colleges are more able to charge what the market will bear.

Recognizing the benefits of having a more educated work force, federal and state governments have long subsidized college attendance, starting with the 1944 GI Bill (formally called the Servicemen’s Readjustment Act) that provided returning WWII veterans with cash to attend college, high school or vocational school, among other benefits. The cost of sending veterans to college paid for itself many times over through increased post-war economic growth fueled by their increased productivity.

In April when I first heard of Bernie Sanders’ free college tuition plan I wondered that if his idea were ever to become law, would it have an effect similar to that of the 1862 Homestead Act ratified about 60 years after the pioneering Lewis and Clark expedition traversed some of the new US territories. Why? Because like promising free tuition in the 21^st century, this Act provided virtually everyone in the US with 160 acres of free land in the mid-19th century.

The US wanted its citizens to inhabit its then very sparsely-populated new western region, so it offered free land to incentivize its settlement. Similarly, when the government wanted to improve the US labor force in the mid-20th century, as service men and women were returning from the WWII, it began subsidizing college education with the GI Bill.

The Homestead Act distributed 270 million acres of federal land (nearly 10% of all the area of the US) to 1.6 million homesteaders (about 4% of the US population). One consequence was that many people who didn’t know much about farming, moved to the Great Plains (where the climate was not benign at all) and beyond, claimed their 160 free acres and had difficulties being successful. Only 40% of the land-grant applicants who started the process were able to complete it and obtain title to their homesteaded land. Despite this low success rate, the Act served to populate the American west.

The timing of now offering a 100% subsidy for public college tuition is very different than the Homestead Act, because one-third of young adults have already “populated” public universities, paid for that education and has college degrees. In addition, it will be challenging for some new students (like the Homestead Act’s new farmers), who are enticed by free tuition but not completely prepared to successfully graduate. Who will be responsible for their success? This job would probably become another potentially significant indirect cost borne by public colleges-universities. Even without a free-tuition incentive, only 52% of incoming college students actually graduate within 5 years (and just 25% from for-profit colleges). This percentage may further fall when more students show up.

Other than offering political enticement for young people to vote for Democrats, is there a broader rationale for spending billions per year on a federal free tuition plan? I don’t think so.

Receiving a BA degree has intrinsic and realized value for each graduate. Every college student and her/his parents understand the value of graduating from college. It is far from zero. Two ways of measuring it are: $610,000 and 2.2%. Over their entire working life, the typical college graduate will earn $1.19 million. This is $610,000 more than the lifetime earnings of a typical high school graduate and $335,000 more than that of a typical associate degree graduate. The national unemployment rate is 4.9%; for high-school graduates it is 5.4%; for young adults with a BA it is 2.7%, 2.2% less than the overall unemployment rate. College graduates both earn more money and have an easier time finding a higher-paying job.

This college earnings premium has existed for a long time, but has not increased recently. According to the Pew Research Center this leveling of the premium is due in part to the reduction in annual real (inflation-adjusted) earnings for high-school and 2-year college graduates since the 1980s, rather than actual gains in college graduates’ salaries. The Pew report found that the median annual real earnings for young college-educated workers was $45,500 in 2013, compared to $28,000 for high-school graduates — a premium of $17,500. College graduates’ real earnings increased only 1.8% between 1986 and 2013; but high-school graduates’ real earnings decreased 7.7% between 1986 and 2013. A Goldman Sachs’ assessment found that students who graduate from universities that rank in the lower 25% of college rankings (often including lower-cost schools like 2-year community colleges and less selective 4-year colleges) enjoy no salary premium at all, and earn less than high school graduates.

More and more college graduates are entering the US work force as macroeconomic growth has dissipated. In 2015 the US real GDP increased only 2.4%; in 2016Q2 annual growth was a meager 1.2%. Thus, with increasing supply of college graduates and lessening demand for their services, more are “underemployed” in jobs that do not require a college degree or are working part-time when they want a full-time job. In July, the Economic Policy Institute found that 12.6% of college graduates were underemployed, much higher than 9.6% in 2007 during the Great Recession.

With more than one-third of young adults now gaining BAs, having an undergraduate degree is becoming a standard, not the exception. Markets, including the employment market for college graduates realize this. Despite increasing costs, college-based wage premiums will diminish because of the pending “normalcy” of having a BA. But, as pundits have stated, what’s more expensive than going to college? Not going to college.

This disquieting trend has prompted some analysts to say that the nation has reached a point of diminishing returns from increased work force educational attainment (referring to college graduation). Harvard economist Dale Jorgenson and his co-authors state that increasing the quality of the US work force through higher educational attainment may no longer provide the same, prominent benefit as a source of US economic growth that it has since the 1950s.

At this point, the US economy may have all the college-educated workers it needs. Jorgenson instead argues that getting low-skilled (non-college educated) workers who have exited the labor market – and thus are not counted as being unemployed – back into the labor force, together with increased private investment, will revive higher growth more than producing more BAs.

And yet the politics for spurring college attendance are inescapable. Hillary Clinton has largely usurped Bernie Sanders’ proposal to dramatically lower the costs of attending college by providing students who attend public universities and colleges with “free” tuition. Unlike Bernie’s original plan, hers wisely caps the provision of free tuition to families who make less than $85,000/yr now, rising to $125,000 in 2021. Nevertheless, such a huge, new subsidy would disproportionately benefit more well-off families than others because as family income rises, so too does college attendance. Only about 20% of children from the poorest 2% of families in the country attend college. For the richest 2% of families, who are far more likely to attend higher-cost, more selective colleges, around 90% of children attend college.

From an individual student’s perspective, it is worth remembering that free tuition does not mean free college. Tuition is a sizeable piece of total college costs, but represents only a part of all college-associated expenses that include living expenses, books, ancillary fees, and room & board in addition to tuition. For the 8 colleges and universities that my family members attended, tuition accounts on average for 51% of total college expenses, according to the College Board.

About 73% of post-high school students going to college attend public colleges-universities. If implemented (and that’s a very large IF, given the political composition of Congress and the cost of such a subsidy), a free-tuition policy will dramatically increase the demand for publicly-funded tertiary education, despite the aforementioned relative price inelasticity of demand for college education. Nothing beats free. Such a free tuition policy will undoubted unleash a lecture hall’s worth of unintended consequences, in addition to diminishing the college earnings premium.

Clinton's plan will not increase the capacity of public colleges-universities to meet the augmented attendance. For several reasons her plan may place public colleges-universities between the rock of satisfying larger numbers of students and the hard place of not having a way of meeting this increased demand. A possible consequence may be that her plan could perversely lead to increased tuition levels that may have to be covered by the federally-funded program. A direct federal subsidy of college tuition would likely increase the already all-too-weak incentives of universities to reign in tuition, unless forced to limit their increases.

There are a plethora of calculations for how much the Hillary-Bernie free-tuition program may cost. My round-number guesstimate of Hillary’s income-capped plan is at least $60 billion per year. For some perspective, this potentially-worthy tuition subsidy cost is about 3 times as much as farm subsidies and almost 2 times as much as the oil and gas industry’s principal subsidies. Mrs Clinton’s overall plan to make college more affordable will cost $350 billion.  

In this time of historically-low growth and missing-in-inaction, Republican austerity-flavored Congressional economic legislation to promote economic progress, it may be that the supply of college-educated people is rising more than demand for them. Promising billions of federal and state dollars annually to zero-out public universities’ tuition may be politically advantageous, as demonstrated by young ex-Bernie acolytes. But by itself it will not help that many people. Certainly not the majority of young (and older) workers without BAs, whose job prospects and wages have dissolved as employers require college degrees for more and more jobs. Moreover, nations like Germany, Finland and Brazil that offer free college education have lower levels of post-high school educational attainment than the US does now. Norway, another free-tuition nation, has a slightly higher level than we do.

Better ways to reduce college costs would be to increase the number of Pell Grants and the grants’ allowable maximum amount, increase the availability of federally-guaranteed Stafford loans and increase federal and state direct funding of colleges in return for their agreeing to stringent limits on allowable increases for in-state tuition. Make all public and private loans’ payments based on the student’s post-graduation income level and increase the payment period from the standard, too short 10 years to at least 20 years that is common in other countries. Also, simplify and consolidate the loan process, such as Jeb Bush, of all people, has suggested.

Qualified students would receive a single line of educational credit and take what they need each semester. For every $10,000 you borrow, you turn over an additional percentage point of your income each year for 25 years. It’s prorated to the exact amount of what you borrow, so that if you have a debt of $28,000 you would be paying 2.8 percent of your income after graduation. The payoff term runs out in less than 25 years if your total payments hit 1.75 times the amount you originally borrowed. Borrowers would pay through payroll deduction or quarterly payments, as they now pay estimated taxes. This would reduce the number of people who are behind or in default (11.6%), often because they are not aware of the confusing array of income-driven repayment programs that already exist.

The media’s fixation with the “student loan crisis” is unduly focused on a tiny fraction of exceptional situations, not the circumstances facing the vast majority of BA holders. The median monthly student loan payment is $203, or about 4% of earnings – roughly comparable to an average household’s monthly expenditures on entertainment. 

Progressive politicians need to recognize it’s no longer the 1960s or 1970s when only 10% of young adults got BAs. Promoting piecemeal policies like free tuition sound admirable, but have drawbacks. Less inviting but more appropriate programs such as simplified, expanded college loans and more direct public funding of 4-year (and especially 2-year, vocationally-focused) colleges-universities will be much more cost-effective for increasing the educational attainment of our young adults. Thomas Hobson needs to be dismissed from academia’s ivory towers.