Richard Florida
by Richard Florida
Sun Sep 13th 2009 at 10:30am UTC

Widening College Cost to Earnings Gap

Business Week economist Michael Mandel has produced a terrific chart comparing college costs to the earnings of young college graduates (25- to 34-year-olds) from 1991 to 2008 (below).

While the lines track one another for most of the 1990s, they began to diverge by the late 1990s, and the gap has grown considerably over the past decade. Mandel finds that college costs in real terms are up by 23 percent since 2000, while real pay for young college grads has fallen by 11 percent.

Money quote:  “This can’t go on. It’s just not possible.”

college cost gap.gif

11 Responses to “Widening College Cost to Earnings Gap”

  1. Andy Nash Says:

    It would be interesting to add employment to the chart. In other words, it might be that wages are not increasing for college grads, but at least they have jobs. See this article on the value of college from the NY Times Economix blog:

  2. Creative Class: College Cost to Earnings Gap | The Daily MBA Says:

    [...] great chart over at The Creative Class. I wonder if we are back to the 70’s when you did not need a college degree to get a good [...]

  3. Buzzcut Says:

    Once Obama solves our health care crisis, I hopes he goes after these outrageous tuition costs. Maybe we need “effectiveness panels” to weed out waste in college programs.

  4. Wendy Waters Says:

    Hmmm… maybe this is a result of demand from parents willing to borrow against the house (and the skyrocketing values at the time) to put Jr. in an expensive private university rather than having him or her attend a state university or the local college.

    Because of strong demand, private schools could raise tuition. I’m sure demand is a little weaker today and that fact on its own may lower tuition.

    I’m not sure there is a crisis in education costs until XYZ State U’s fees are growing at similar rates.

  5. Cliff Lippard Says:

    Maybe the BA is the new HS degree… the minimum required for a good career. I wonder what the cost to salary trend is for graduate degrees for the same period?

  6. Anon Says:

    Based on experience in the State U system… I would venture the guess that the trend is similiar.

  7. Dave Says:

    That’s actually a somewhat misleading graph. It compares PRIVATE college costs with OVERALL income. A real apples to apples conparison would be PRIVATE costs with income of holders of PRIVATE school bachelor’s degrees. I’m sure it’s still not a great picture, but the comparison should at least be valid.

    A couple of other comments:

    1) Most people don’t pay full costs at private universities, there’s usually a substantial amount of aid so plotting tuition, room, and fees doesn’t really show actual cost to student.

    2) Unfortunately the supply of private university slots is pretty fixed, and the supply of potential students is growing, this leads to rising costs. If they didn’t care about income diversity most schools would be able to find enough students willing to pay to fill their classes. Fortunately most do and work to get lower income students in their classes.

    3) The thing that will lower costs at State U’s is online education which will expand greatly over the next 20 years to become the norm in many fields and universities. This is somewhat sad because there’s a lot to be gained from a traditional university experience but it will represent a better value for most.

    My thoughts anyway

  8. Deep Says:

    One possibility to solve the rapid rise of tuition, is modeling something after the HOPE scholarship program in Georgia. Where high school students who have a B or better can go to the University of Georgia for free. The scholarship is funded through the Georgia lottery.

    It is crucial in an information economy for education cost to be kept low. It simply doesn’t make any economic sense to have educated people burden with debt up to $20-40,000 as they enter the workforce. Rather than investing in new ideas, that money is going back to the banks.

  9. CR Says:

    I would be interested in the graduation rates of low income HOPE scholars.

  10. Be the change: Rebecca Thorman | Justice for all Says:

    [...] can keep up, I don’t want to be average. I want to inspire and empower and make change. Like in education. And equality in design. And the environment. And public art. Things that connect people and [...]

  11. Jim Taylor Says:

    The inherent information flows associated with the education process should theoretically become more efficient via the implementation of advancing technologies.

    What is the primary impediment toward implementing these efficiencies?

    Is one of the impediments toward a state or region implementing new efficiencies in the knowledge transfer process the uncoupling of the benefit of such investment?

    Thus the emphasis on cash cow research facilities?:

    What’s more, the creative-region dynamic injects an added disincentive for investment in public primary and secondary schools. Leading creative regions like Austin “import” many of their workers by winning the regional talent exchange, in effect plucking them after they’re fully educated. Regions with top-flight universities, like Stanford and MIT, can also draw the best and brightest high school grads from everywhere and hold onto many of them after graduation. Either way, mobility has broken the connection between local investment in education and regional economic growth. In fact, some regions can do quite well without anteing up a big investment in homegrown talent. Talent-importing hotbeds like the Bay Area and San Diego have thrived in California, home of tax revolt, where public funding shortfalls often have held back local public-education upgrades. An obvious long-term danger looms: If too many regions begin to rely too heavily on imported talent rather than growing their own, the whole process peters out. Our national economic competitiveness declines.

    If this is the case then wouldn’t the talent importers such as Austin need to compete against other importers via gained efficiencies (assuming that these importers also are able to retain a significant percentage of ‘home cultivated’ talent)?