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College Dropouts And Unemployment, At What Cost?
By EconMatters
The American Institutes for Research (AIR) published a report in August this year taking a look at the economic impact of college dropouts. The AIR analysis estimated that the cost to the nation from students who started college in fall of 2002, but failed to graduate six years later amounted to $4.5 billion per year in lost earnings and taxes to state and federal governments.
The breakdown is as follows:
• $3.8 billion in lost income;
• $566 million in lost federal income taxes; and
• $164 million in lost state income taxes.
(Check this infographic for a cliff notes version of the aforementioned AIR report, plus data from some other sources) .
A couple of months ago, we wrote about the United States could soon face a shortage of 20 million college graduates by 2025 putting the country's future at risk due to a low college graduation rate. However, the reality is while quite a few sectors like technology and energy are experiencing an increasing shortage of skilled professionals, new college graduates in the country are having a hard time finding a job. In fact, some of the protesters in the now two-week-long Occupy Wall Street movement are such youngsters.
This discouraging jobs picture is a reflection of a fundamental and structural issue in the American labor market execrated by the Great Recession, which has prompted some to seriously question whether it is even worthwhile to invest money and time in a college education. But based on a recent Census Bureau study which concluded that the estimated impact on annual earnings between a person with a professional degree and one without a high school diploma was about $72,000 a year, we'd say a college degree definitely pays off in the long run in terms of the quality of life, and a sense of self realization, although it may seem like the worst jobs market time for classes 2008 to 2011.
However, the more rooted issue is that the high college dropout rate has been a persistent trend in the U.S. for decades. The AIR study was conducted based on a sample group in 2002, six years prior to the financial crisis and recession, which suggests the dropout rate, and collective costs could be much higher by now.
Russia and South Korea now outrank the U.S. in terms of college graduation rate. President Obama has vowed that America will retake the lead in producing college graduates by 2020, and there are initiatives aiming to increase college graduation rate. Nevertheless, that timeline could be pushed back significantly amid the high national debt and budget / deficit cuts.
One interesting statistics contained in the infographic is that the college dropout rate varies significantly among different ethnic groups, and Asian is the group with the lowest dropout rate at 3.4%. One has to wonder if the Asian "Tiger Mom" (Trust us, it is for real.), which is essentially a cultural difference between the East and the West, has much to do with that?
Further Reading:
Are Silver and Copper Prices Signaling A Global Recession?.
College Graduates: Too Many In China, Not Enough In America?
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Whoa. You were talking about college dropouts and now you're pulling statistics about not finishing high school comparing that to a "professional" college degree? Given the enormous debt load taken on by many college students, which can prevent home buying and starting a family1 and cannot be discharged in bankruptcy, it is valid to question the value of college. If I had it to do over, I think I would be going into a skilled trade.
1 http://www.nytimes.com/2011/04/12/education/12college.html
Q. Why do NYC taxi cabs have two sun visors? A. one is to display the City's taxi permit, the other displays the driver's PhD in Comparitive Literature.
I thought the PhD was in Art History, 18th Century French Poetry, or Black Studies.
Right on, XitSam. My read on "professional degree" is law (J.D.) or medicine (M.D.). That's a far cry (education-wise and salary-wise) from the average four-year undergrad degree.
ETA: Oh, and I've thought the same thing about a skilled trade vs. college, if I had the choice to do over.
Damn straight. Where the hell is this 72,000 number coming from exactly? <b>None of the postdocs I know actually earn even 72,000 as a base salary</b>.
+1 (can't vote this up for some reason)
Fuck it. Another piece of brainwash to make those that borrow money to go thru college feel good. Take a hard look at the issue instead. What college teaches basically has become obsolete already. Besides most learning materials even from elite colleges, such as MIT and Standford, have become fully available online free of charge. Today's young people don't necessary need that piece of paper for confirmation of what they can do with corporate lives anymore. Those that are still firm believers of the long-gone era will suffer because the best they can acheive is their debt servitude. Fuck it.
And I'll add to that that there's NO SHORTAGE of graduates out there. PhDs are a dime-a-dozen, so common that job prospects absolutely suck. Expect to work 100 hours a week for 30-50k a year because if you don't then one of the massive numbers of Indian or Chinese postdocs will happily take your place.
I have acquired THREE proper (as opposed to diploma mill) university degrees over the decades. All had somewhat useful components but, overall, were next to completely useless compared to what is learned from on-the-job experience. The old school->university->profession model is slow, obsolete, inappropriate, inflexible, overpriced and heavily over-subscribed compared to the actual needs of the workplace. It only makes sense if you want to become an academic, something that is becoming harder and harder as universities cull their tenure offers to save money.
Advice to anyone thinking about burning a minimum of 3 years on tertiary education: don't waste your time.
Advice to policy writers who think pushing more MORE kids into college will in some way help the economy: please resign because you're an idiot.