BEES’ KNEES AND WAGES

To bee or not to bee, is that the question? 

Mea culpa. I’ve been in a rut (though not of the elk-ian sort); I spend too much time reading about and reacting to tweets from the child-like creature professing to be our national leader. So I’m taking a vacation by giving up reading news about our president’s tantrums for the summer starting today on our 241st birthday. 4 No Trump is now for me more than a bridge bid. I’m following Gideon Litchfield’s apt suggestion to ignore this man-child’s paroxysms. According to Litchfield, a normal US president is like a creature in the middle of a lake, his every move creating far-reaching ripples that people pay attention to. Our current leader is like a rock in a stream; he creates turbulence and is to be avoided, but everything flows on around him.

Instead, I’ll focus on something apart from the hugely disturbing, corrosive and sad politics of our president.

Say for example, how long have workers’ wages been the bee’s knees?

It’s not a question that’s occupied my or likely your forebrain that much. But it does have implications beyond the biological superfamily Apoidea, where bees reside. To be clear, bees indeed have segmented legs that include knee joints. Praise bee. The idiomatic phrase “the bee’s knees” became popular in the 1920s and refers to something being of high quality or excellence.

Not just the bee’s knees are excellent. There are close to 20,000 known species of bees that are found on every continent except Antarctica, in every habitat on our planet that contains insect-pollinated flowering plants. Many bee species are eusocial, living in cooperative, communal groups (e.g., hives) headed by a female queen bee. Bees pollinate more plant species than any other pollinating animal, including ants, butterflies, bats and hummingbirds.

It is estimated that about one-third of the human food supply depends on pollination, most of which is accomplished by bees. And unlike any other pollinator, bees (specifically the most well-known type, the European Honeybee) produce wondrous honey as well as beeswax and royal jelly. Royal jelly isn’t served on Prince Charles’ UK muffins in the morning; it’s a honeybee secretion used in the nutrition of larvae, as well as adult queens.

In 2013 more than 2.6 million bee hives produced about 149 million pounds of honey in the US according to the National Honey Board. What state produces the most honey? Although it’s unlikely, if you picked North Dakota you’d earn a B++. Bee statisticians estimate that in order to produce 1 pound of honey, 2 million flowers must be visited, which takes a hive 55,000 miles of flying. That’s a lot of flying without any frequent-flyer miles. An average worker bee makes only about 1/12 teaspoon of honey in its lifetime. Thanks guys.

Bees have been making honey for well over 100 million years. Humans have enjoyed a long, positive relationship with honeybees; except when we misbehave and get stung. Depictions of humans collecting honey from wild bees date to 15,000 years ago; efforts to domesticate them are shown in Egyptian art more than 4 millennia ago. Jars of honey were found in the tomb of Tutankhamun. The Greeks treasured honey; Virgil and Pliny wrote about beekeeping 2,000 years ago.  

Onward to wages. Economists generally define wages as the regular payment provided at a fixed rate to labor for services undertaken. For employers it is the cost of using labor, as opposed to using the other two factors of production, land and capital. Wages are determined by several factors, principally the demand and supply of labor as well as labor productivity - the output produced per person-hour worked. Sounds fairly simple, but it usually it isn’t.

One continuing issue regarding wages is how has the premium paid for higher-skilled, more-productive laborers compared with lower-skilled workers over time. This concern has risen in importance as uneasiness about technological displacement of middle-skilled workers has grown and the wages provided to lower-skilled workers and others have stagnated. I wrote about the controversy surrounding how the rise of artificial intelligence (AI) may affect workers’ jobs when I examined robots, blacksmiths and the future.

The seminal efforts of Professor Gregory Clark at UC/Davis offer an intriguing perspective on the premium paid to higher vs lower-skilled workers. I have found Prof. Clark’s deep excursions into quantitative economic history fascinating. His captivating book, A Farewell to Alms, offers insights based on the extensive empirical data he’s collected about the world’s economic history including why the great “divergence” of the Industrial Revolution happened first in England and not, for example, China.

Prof. Clark has recently assembled an impressive dataset of wages in England from the end of the 12th century through current time. With almost 800 years of English data (!), he compared skilled-worker craftsmen’s wages with that of common laborers from the middle ages through the Industrial Revolution and beyond. What his data show is that except for two periods of significant change, the recent rise in the wage premium for skilled and college-educated workers is historically unusual, as shown in the chart below from The Economist.

Sources: The Economist and Prof. Gregory Clark

The chart shows two large changes in the skilled-worker wage premium. The first dramatic decline happened in the 14th century, when average life expectancy at birth was about 31 years. [Interestingly, this short expected lifespan basically was unchanged since Classical Greece – the 4th and 5th centuries BC, when it was ~28 years – and that of 17th century England at 35 years.] With such a short lifespan and when interest rates were high a worker’s taking on an apprenticeship (often 7 years long) to become a skilled craftsman had a high opportunity cost. Fewer men became craftsmen and the craftsman-to-common-laborer wage premium grew until the early 1300s. Thus, from the mid-1200s through the beginning of the 14th century craftsmen’s wages were indeed the bees’ knees. It wasn’t to last.

The bubonic plague (Black Death) cast its very dark penumbra on England and the rest of Europe, starting in the mid-14th century and continuing sporadically through the mid-17th. After 1348-49 when the plague first struck England, its population dropped by one-third precipitating reductions in interest rates and significantly adding to the already outsized challenges of living. Apprenticeships became more alluring both financially and because there were far fewer skilled workers. From the chart, the increased supply of skilled labor relative to common laborers soon reduced the wage premium ratio and kept it around 1.50 until the late 1600s.

The second big change happened during the 18th and 19th centuries. The craftsman/laborer wage premium rose at the beginning of the 18th century and stayed high until the beginnings of the Industrial Revolution in the mid-1700s. Skilled workers’ wages were the bees’ knees then. However, the Industrial Revolution was a game-changer for virtually everyone in England, and soon thereafter the rest of Europe, America and the world. For the first time in history structural technological change created widespread job displacement and opportunities.

In a real sense the Industrial Revolution was realized by the coincident mechanization of agriculture. The Agricultural Revolution allowed land-owners to reduce their field labor and still increase output via improved labor productivity. The enormous increases in agricultural labor productivity were realized by adopting a series of new technologies that coincided with the Industrial Revolution including the cotton gin, iron/steel plows and mechanical reapers. By the 1990s, farm labor and land productivity had increased 100-fold in 150 years.

The decline in the craftsmen/laborer wage premium started in England as the newly-mechanized textile industry hired unskilled laborers – most often from farms – to replace artisan craftsmen in new factories. Industrial machines could be operated by workers with far less training than craftsmen. Average daily income in 1861 England was 14 pence for 10 hours of work or about $336 in today’s dollars. The modernization and automation of British industry steadily became more widespread in the 1800s. The skilled-worker wage premium dropped, as shown in the chart, and didn’t start to recover until the mid-20th century.

Most recently, wage premiums during the past 40-50 years have been directed to college graduates, as I’ve discussed before. As the number of college degree-holders continues to climb, it’s unclear how long this premium will last. The multi-century historical wage data discussed above show that wage premiums awarded to more skilled labor eventually subside. Even the bees’ knees ultimately crumple.

THE FALLACY OF FREE HIGHER EDUCATION

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

Forget college football, we are now entering the peak of college applications season, when high-school seniors decide where they want to spend the next several years of their lives. The ever-rising cost of going to college is a prominent factor for many applicants. In May, Sen. Bernie Sanders introduced legislation to make 4-year public colleges and universities tuition free. He said, “We live in a highly competitive global economy. If our economy is to be strong, we need the best educated work force in the world. That will not happen if every year hundreds of thousands of bright young people cannot afford to go to college and if millions more leave school deeply in debt.”

His plan, reputed to cost $750 billion (B), would replace what public colleges and universities now charge in tuition and fees. It would also overhaul student loan programs to reduce their cost in part by eliminating any accrued federal profits on the loans. After Sen. Sanders’ noteworthy announcement, Hillary Clinton produced her own plan to reduce the cost of going to college by providing $350B in federal money to states over 10 years, so undergraduates would pay tuition at public colleges “without needing loans.” If Sen. Sanders’ or Hillary’s plans somehow become law (a very unlikely prospect with Republican majorities in Congress), far lower (“free”) college costs will dramatically increase the demand for higher education.

Both plans embrace the idea that a college degree is the new high school diploma. Although a growing number of people believe this, I think it’s exaggerated and not self-evident. Holders of BAs still receive a sizeable 60% premium in wages over high-school diploma holders. Sanders’ and Clinton’s proposals would essentially expand the long-established norm of free K-12 public education and offer free K-16 public education. To say that’s a big change in government educational policy is a PhD-level understatement. From a market perspective, the concept of lowering a service’s price a lot (a college education) in the face of notably escalating demand poses many challenges.

According to Dept. of Education statistics, 81% of high-school age students now graduate with a diploma, 34% of young adults now have a BA, and 44% of young adults have either an Associates or BA degree. Interestingly, 81 years ago, in 1934, 34% of adults had a high-school diploma, the same percentage that now holds a college degree.

Both Sen. Sanders’ and Hillary’s ideas to remove the expense of tuition when going to a public college is a leftish shibboleth that will cost a ton of taxpayer money[1] and put the post-high-school education (PHISE) market in a precarious, unbalanced position. It will significantly increase the number of students demanding an Associate or BA degree without increasing PHISE capacity to actually educate them.

Beyond these consequences, tuition-free college isn’t likely help that many young adults because of subsequent greater “degree-inflated” job requirements imposed by employers and probably most important, insufficient incentives for colleges to produce graduates more effectively and efficiently.[2]

I doubt that highly-selective colleges will increase their educational capacity much, but other private and public colleges, 2-year and online colleges might expand to meet more demand. However, such expansion will only occur if additional public funding for more facilities and faculty is made available to public universities and community colleges – something that neither Sen. Sanders’ nor Hillary’s plans directly address. Increased funding also flies in the face of many states’ contracted fiscal support for their public universities and community colleges during the past decade. This is why low-overhead providers of online PHISE services (such as MOOCs) will see this policy change as a significant opportunity. The need for more bricks-and-mortar classrooms (and of course administrators) may be partially avoided via online means. Whether online college education is effective remains an open question.

At first blush a “tuition-free college education” sounds quite appealing; everyone likes “free” – especially if you’re a young adult or the parent of one contemplating college – but has as much veracity as a driverless car. This idea has some merit from a generationally-based subsidy perspective. More public subsidies for young adults might begin to balance the far more sizeable subsidies offered to old folks through Social Security and Medicare/Medicaid expenditures, but I’m not really sure it’s truly equitable. After all, a university education’s principal benefit goes to those who graduate with a degree that traditionally has been rewarded by getting a much better (higher-paying) job than young people who don’t have a BA. Such wage premiums might continue, although I have serious doubts as ever-more students enroll in (and hopefully graduate from) college.

The valuable collective, social benefit of having more college graduates accrues from having a better educated more knowledgeable and productive population. This social benefit explains why subsidies are available to college students via government-guaranteed and -subsidized student loans and education tax credits. These fiscal mechanisms reduce the cost of attending college and are among the few directly helping young people.

I’m all for having more young adults graduate from college. But the market for educated labor in the US, like every market, has two sides to it – supply and demand. If the supply of young adults with college degrees rises significantly, as Sen. Sanders hopes, their salary prospects may not. Unless employers’ demand for educated labor also increases a lot, the price of such labor (their wages) won’t increase, it could even decrease. Such reductions in the wage premium for college graduates won’t be greeted with enthusiasm. With a “free college tuition” policy in place, maintaining the college-educated workers’ wage premium will require increased macroeconomic growth to spur employers’ hiring of more such workers. And it probably will further degrade the wages of lower-skilled high-school graduates. Despite its virtues, designing and implementing policies to advance macroeconomic growth remains a quixotic quest for economists and politicians, especially when Republicans decrease publicly-funded research, infrastructure expenditures and investment incentives.

Also, a sustained, large increase in folks who have PHISE degrees is likely to reduce the marginal value of such degrees, as reflected in reduced expected wages, even with economic growth. The law of diminishing marginal returns applies to holders of 2- and 4-year college degrees with respect to salary prospects simply because having such a degree will become less distinguishing.

No one wants to consider this possibility – and certainly no politician will say it, especially during the unending election season. Because it’s contrary to our long-established, personal hopes that more education provides better economic prospects. Middle-class citizens’ “American Dream” is founded on this hope; they hold it as a keystone of their children’s brighter future.

This is the fallacy of espousing unsystematic policies that can change only one part (the supply) of the market for highly-educated people. Such policies will produce an imbalance for college-educated workers because policy-makers don’t consider about how employers (the demanders) of BA-holding people will react to the consequences of their policies.

Other nations have adopted policies which reduce the cost of higher education, usually involving significant public expenditures and subsidies. Of the 15 countries listed, the nation with the lowest 2010 college costs (tuition, books and fees) was Denmark – Bernie’s favorite? – with annual costs of only $530. I can’t even count that low. The US college costs were $24,700 (private) and $7,123 (public). As a percent of median household income Denmark’s college costs were 2.3%, the composite US cost was 51.3%. According to a recent OECD report, 15 of the 33 nations had higher college (tertiary-level) graduation rates than the US, including Denmark. How does Denmark achieve such low college costs and elevated graduation rates? In part by having its citizens pay higher income taxes – a 71% higher average income tax rate than the US.

Our nation has a long and pricey way to go if we want to significantly lower the expense of getting a college degree and increase our national college graduation rate. Lowering college expenses for students is only one part of a possible solution, which will only be effective and beneficial if college education policy is systematically implemented, covering both the supply and demand sides of the market.

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[1] Actually a lot more than a ton. One billion George Washington $1 bills weigh about 1,100 tons. So Sen. Sanders’ free college plan would weigh 825,000 tons of Georges. That’s about the weight of 8 huge Nimitz-class aircraft carriers, the largest US Navy ship. And something that Sen. Saunders would no doubt be very happy to trade-in for more college students.  

[2] Effectiveness is doing the right thing; efficiency is doing a thing right (in economics, doing it with the least opportunity cost).

EDU DISCONNECT

Education is not the filling of a pail, but the lighting of a fire. ~ William Butler Yates

Social, cultural and educational forces have reinforced the idea that success and a college degree go hand in hand. College is the academic coda to the American Dream, since in many people's minds college graduation can make the Dream inter-generational. In 2010, 5.9 million Americans between 25 and 34 years old have post-secondary degrees. Looking forward, however, I'm not so sure this educational mantra will remain true for every high-school student now considering college.

President Obama, like every politician worth his salt, rightly states that getting a good education (with emphasis on a college education) is a ticket to a brighter future. He's correct in many ways. Currently, US unemployment is a historically-miserable 7.7%. However, for folks with a BA or more, it's half the national number, 3.8%; and for those with less than a high-school degree it's a wretched 12.2%. College graduates earn during their working lifetime, on average, nearly $1 million more than people who don't go to college.

However, the popular perception that a BA creates an ever-increasing monetary bonus is no longer true. Over the past decade, the wage premium from receiving a BA has been a steady 60% more than people without a BA. Impressive and meaningful, but this premium has not grown as it has in the past; it's been constant. The BA wage premium has been maintained in no small part because the wages offered to people with only a high-school degree or less have actually decreased.

It's hard to expect that this premium would now increase as more and more young people receive college degrees. Between 1992 and 2008, the number of BAs awarded increased by 50% to more than 1.6 million. However, the wage premium provided to people with advanced degrees (masters, professional and PhD's) has progressively increased. Because of the increasing supply of graduates with BAs, those with advanced degrees are as distinguishing now as BAs were in the 1970's and 1980's. Nevertheless, our increasingly well-educated citizenry has broadly benefited our nation and its citizens, not only with income growth, but in many other equally-positive, important ways.

But for all too many recent 2- or 4-year college graduates, their post-graduate world has collided with the reality of the nation's extended economic doldrums. Just ask any graduate who's waiting on restaurant tables and/or living with his/her parents to save money to pay off student loans. About two-thirds of BA recipients take out loans to finance their education. Student loans now total more than $1 trillion (more than credit card debt), and one in 6 student borrowers are in default.

During our continuing labor market weakness employers can afford to be much pickier about what they require of applicants, who they hire and how much they offer as starting wages. A recent article illustrates this "up-credentialing" trend, where more employers now require a job applicant to have a college degree that didn't in the past. For example, 65% of ads for claims adjusters now state that a BA is required, only 48% did in 2007. The dream of achieving success through a BA is starting to seem chimerical for more graduates.

Underemployment of college graduates – in jobs that require a BA, but do not need college-level knowledge or skills – has spread widely. This expanded "trickle-down" of a prerequisite BA makes it even more difficult for job entrants without a college degree to now find meaningful work. I believe this is part of an educational disconnect perpetrated by the educational industry.

Yet not just college students and graduates are dealing with changed financial circumstances. The fiscal challenges facing colleges and universities themselves are manifest. Colleges have heavily borrowed over the past decade, following the edifice complex, to upgrade their facilities. College debt levels have doubled – now at $205 billion – in the decade ending 2011; but their pledged gifts and investments received have dropped by more than 40%. Here are a few telling statistics that show how colleges have allocated their thinning financial resources: long-term debt at US nonprofit colleges grew 12% per year from 2002 to 2008; interest costs (on their debt) increased 9% per year. Instructional costs increased only 5%. 

Despite underemployment of perhaps 50% of college graduates, an increasing number of media articles mention the "skills gap" that employers bemoan makes it impossible to hire as many skilled workers as they have need. Although there are undoubtedly firms that can't find workers with needed skills, skills that often require STEM knowhow (Science, Technology, Engineering and/or Mathematics), other firms lamenting a lack of employable workers continue to offer these skilled jobs at rock-bottom wages – starting salaries around $10/hr. If there's truly a "skills gap" in our labor market, then common sense (and extensive historical data) argues it can be lessened by raising wages/salaries to attract more qualified applicants. Why would a high-school or junior-college student with nascent STEM skills apply for such jobs that pay $10 to $15/hr when a McDonalds shift manager can make about $14/hr, and does not need any STEM knowledge? Good question.

A more fundamental question is: are high-schools and colleges producing graduates with skills needed in today's economy? When it comes to non-college-attending high-school graduates and manufacturers the answer seems to be, not really. Far too few people graduate from high school knowing the basic technical, math and science skills that more and more firms (including modern, heavily computer- controlled manufacturers) need.

Not enough newly-minted graduates have gained the skills to lay claim to the expanding job opportunities in modern manufacturing, modern science, modern engineering and modern quantitative analysis jobs. Why are job opportunities increasing for skilled, quantitatively-trained people? In part, because the average age of high-skilled factory workers is now more than 55 years old. And because quantitative methods have become necessary and expected in more and more jobs as on-line systems collect and assemble ever-more Big Data that needs to be properly analyzed and assessed.

For several reasons, today's labor market – that supplies workers to employers who hopefully demand them as employees – seems increasingly dysfunctional. This is not really a skills gap in the labor market; it's a really supply shortage of skilled workers coming into the labor market from schools, a lack of interest by students to learn such skills and a reluctance of some employers to increase wage offerings for higher-skilled workers.

First, various employers seem unwilling to understand that if they want workers with relevant skills they have to pay more than $10/hr to attract them. Second, students and potential workers must understand that in order to gain jobs in today's economy they will increasingly need skills beyond general studies and liberal arts. Although education in the liberal arts remains a necessary foundation for understanding modern society, quantitative, STEM-based skills are fast becoming necessary for a far broader array of jobs.

Finally, educational institutions that now seem disconnected from job market needs must up-date and revise their curricula to reflect these evolving needs in the labor market. This is especially true for high-schools whose non-college-attending graduates find themselves with no readably employable skills.

Basic economics explains a fair amount of this new state of affairs in the education labor market. This disconnect may result from being stuck in "the good old days" when having a college degree was truly exceptional, no matter what you majored in. It still is, but much, much less so. Now, your choice of college major makes an ever-larger difference in finding a worthwhile job.

I grew up in the 1950's and 1960's in a household where both my mother and father were college graduates. I didn't realize how unusual that circumstance was until recently. It seems in the 1960's only 3% of US households had both parents being college-educated. In fact, when my mother and father completed college in the heart of the Great Depression, less than 1% of females received a BA and less than 4% of all young people had college degrees. They were truly exceptional. In those times, as well as into the late 1960's when I graduated from college, having a BA remained very distinctive. In 1970, 11% of people over 25 years had college degrees. In 2012, for the first time 30% of young adults report having a college degree. In April, the Bureau of Labor Statistics reported that 68.3% of high-school graduates were enrolled in colleges or universities.

The difference between 11% and 30% may not seem that large, but over the past 20 years the promotion of college as one's ticket to (especially financial) success has been persistent and widely adopted. With more and more young people graduating from college having a BA remains distinguishing, but much less so than in the past – especially when combined with the effects of a slow-growth, high-unemployment macroeconomy. Yet understandably demand for post-high school education remains very strong and quite price inelastic, especially at so-called "selective schools." In my view, this continued growth in demand for tertiary education has lessened the incentives for colleges to modernize their curricula.

During the past decades, as the supply of young people in colleges and receiving degrees has significantly increased, the economic "law of diminishing returns" has become relevant. The return from receiving a BA probably has diminished compared to a decade or two ago; prompting articles with titles such as "Is college a rotten investment?" [This article's unsurprising answer: no, it's not a rotten investment. But some schools offer much lower returns – specifically on-line and for-profit – than others.] In other words, college-graduates' expectations about striking it rich just because they've got a BA needs some revision. The college return increasingly depends on exactly what skills/courses graduates gain, not the BA diploma itself.

What's happened with US education, relative to the rest of the educational universe? Perhaps most significant, over the past several decades US education has fallen from its top-tier perch of educational performance relative to other nations. After WWII, the US led the world in broadening and improving its citizens' educational attainment. This broadening was founded on passage of the 1944 G.I. Bill that sent ex-soldiers to college and on the Sputnik-inspired 1958 National Defense Education Act, which increased Federal spending on schools at all levels and created subsidized student loans for post-high-school education. Later legislation, like the 1997 Taxpayer Relief Act, further broadened tax breaks and subsidies for college education. Gradually other nations saw the wisdom of such policies and eventually either caught up or surpassed us. US education now badly needs to catch up.

By 2010, 21 OECD nations (out of the 37 member countries) have high-school graduation rates higher than the US, including the Czech republic. In 2010 the US ranked 9^th in university-level education entry rates among OECD nations. In 2011 US high-school students fell behind 31 countries in math proficiency and behind 16 countries in reading proficiency. The US ranks a grim 43^rd in the world, right behind Morocco, when comparing public education expenditures as a percent of GDP. This mediocre performance of our students bodes ill for our continued ability to compete against ever-stronger international rivals.

The US needs to counter this slipping performance if we want to benefit to our citizens and grow our economy. Here are 4 actions I suggest the US education system needs adopt to improve and become less disconnected.

1.       High schools and employers must start talking together and re-emphasize vocational education as a viable option for 18-19 year old people interesting in employment directly after graduating. Such communication, together with specific programs, has begun closing the gap between education and employment, has shown promise. I'm not talking about dusting off the shop benches and auto repair facilities that were shuttered long ago when vocational ed was swept under the educational rug and pre-college academics was put on its pedestal. We seem willing to forget that even now at least one-third of high-school graduates don't enter college and their job prospects have never been less likely or less rewarding. Many of these graduates may do better through vocational-technical-apprentice programs in high-school and 2-yr colleges. These programs have worked in the past and can again, especially when affiliated with employers who need skilled workers. These programs need to become far more practiced and widespread. The costs of providing vocational ed are declining through the use of technology that effectively inter-connects students and teachers.

2.       High-schools should mandate that all graduates must master two basic skills; writing cogent, well-constructed expositional prose with word-processing software, and knowing what I call "practical mathematics." Practical math refers to knowing how to use algebra, knowing how to graphically represent algebraic formulas, knowing how to use computer spreadsheets and understanding introductory statistics. Every graduating high-school senior needs these skills in order to be employable.

3.       Junior/Community colleges must augment these writing and math skills so graduates with associate degrees entering the workforce can be understood and can easily deal with numbers and data that surround virtually every new non-minimum wage job.

4.       Colleges and universities have been stultified into thinking no substantive changes in their curricula or programs are needed due to the ever-increasing tide of applicants. After all, students keep knocking at their front doors, almost begging to be admitted, why do anything different. Such colleges proudly display single-digit acceptance rates with tuitions and fees dutifully raised. That thinking is misguided and unsustainable for 2 reasons. (A) Although 68.3% of high-school graduates are now enrolled in colleges, only 56% of college students complete 4-year degrees within 6 years, and only 29% of those who start 2-year degrees finish them within 3 years according to a Harvard study. US college dropout rates remain distressingly high.[1] (B) US failure to graduate rates are highest among any of the 18 nations tracked by the OECD. In other words, too many US colleges aren't terribly good at what the purport to do – produce graduates. Has such mediocre performance caused a re-assessment in college presidents' compensation? Apparently not. A NYTimes article states that the number of presidents earning in excess of $500,000/yr more than tripled to 157 over the past 8 years.

What can be done at the college level? First, start by being honest with applicants and explicitly saying that gaining a BA is not a ticket for guaranteed financial and personal success. It requires significant work. It's education, not a job card. Getting a BA will involve studying hard and making strategic choices. A BA may be necessary for all too many jobs (at least half of which really don't require college-level thinking), but it's not sufficient.

The motivation for going to college needs to include interest in gaining a range of knowledge per se, not simply (or only) mastering the rec center's climbing wall and getting hired by the likes of Google, Apple or Genentech. I know, going to college to gain and expand one's knowledge may be so yesterday. But for decades college administrators have sold their service as if it were a credential for success. Middle-class families, employers and most importantly federal  and state governments have swallowed this hook, line and sinker. In this educational variant of the American Dream, governments have continuously expanded subsidized loan programs so more students can afford college, which in turn has lessened the need for colleges to moderate their ever-escalating tuition and fees. Virtually everyone by now knows that the cost of a college education has followed a ballistic trajectory over time: rising 4 times as fast as all other goods and services since 1995.

Federal and state governments should leverage their large power of the purse to force colleges to adopt 3 needed, transformative changes. Colleges can receive continued financial and research support from the government only after they accomplished the following. (A) Higher education must create publicly-available standards of academic quality. These standards, which do not exist now, would be applied to colleges' degree programs allowing prospective students and others to assess a particular college, relative to the standards' norms. (B) Numerous colleges need to enter the 21^st century by vacating the 19^th through modernizing both administrative and educational fiefdoms. Too many colleges have as many administrators as instructors. The current management, operational and administrative structure of colleges (as well as K-12 schools) hasn't really changed in ages and all too often contains bureaucratic inefficiencies. By their nature, such bureaucracies will be reluctant to adjust. The carrot and stick of government funding may make them see the "value" of modernizing and improving.

 It goes without saying that Harvard is an exceptional university and practically without peer academically. Like many colleges, Harvard has heavily invested to maintain its exalted position; debt has increased $7.4 billion in the last decade (the largest increase in the nation). It graduates 97% of its undergraduate students within 6 years. And yet, this university seems a decent example of a bureaucratic mausoleum. Harvard comprises 11 separate academic units and 10 faculties—that teach 6,700 undergrads and 3,900 grad students. It offers 46 undergraduate majors, 134 graduate degrees and 32 professional degrees. In other words, even exceptional colleges will likely benefit from modernizing their operations and realizing efficiencies that private industry has practiced for generations.

(C) Colleges must adopt and use modern educational technologies that support MOOCs (massively open online courses) and other innovations that can reduce cost and improve efficiency, flexibility and accessibility. I expect MOOCs and their associated infrastructure will exert a disruptively positive, broadening and re-connecting force on tertiary education.

With these changes more young people will receive more value from their high-school and  post-high-school educational experiences. Education will become more connected and more effective, for everyone's benefit.

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[1] The dropout (or failure to graduate) rate for private for-profit colleges is an astonishing 78%; for private nonprofit colleges it's 35%, for public nonprofit schools it's 45%.