Wednesday, September 9, 2015

The Economics Of Higher Education In The US

The higher education system in the US is a multi tiered system, and each tier has a unique economic structure.  Adam Davidson describes the economics of each tier and he explains the relevance of each to our social and economic structure.  He argues that society benefits in numerous ways from a more highly educated population.  Increasing access to education in the US is strongly related to the rapid growth in the US economy as well as to the social progress that has made during much of our recent history.  There are also personal and social costs to the lack of access to higher education.  Unfortunately, access to higher education in the US has been declining in the last few decades.  The US once produced more college graduates per capita in than any other nation.  That is no longer true.  Other advanced nations are doing a better job of providing higher education to its citizens than the US.  Some of this decline is the result of unfavorable politics that led to reductions in state funding for higher education.  Education is one of the largest budget items in most states and Republican governors, in particular, have courted political favor by cutting outlays for higher education.  They win elections but their decisions undermine economic growth and associated tax revenues in the longer run.  Reduced access to higher education also increases the cost of social welfare programs as well as expenditures on the criminal justice system.

Some of the information that Davidson presented is fairly well understood. Fortunately, he provided an analysis of middle class budgets during two periods in US history which sheds new light on the relative cost of higher education to middle class families.  The cost of buying a new car is pretty much the same today as it was several decades ago. That is not the case for higher education.  Middle class families today have been hit with a double whammy.  They earn less income, and the cost of higher education has inflated more rapidly than other major budget items.  They have been priced out of the market.  Moreover, some of their lower cost alternatives are economic scams.  They take out publically supported loans to enroll in private institutions that are best described as scams.  Most who enroll in them do not graduate, and few who graduate have access to jobs which enable them to pay back their loans and enjoy some of the amenities of a middle class life.  Unfortunately, they have also been priced out of the market in many state university systems which do not have the funds to provide financial support to middle class households.

Davidson describes some of programs that have been developed to address these problems.  Some are promising but more are needed.

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