The New Yorker The Financial Page Debt By Degrees

Este artículo publicado en The New Yorker analiza los argumentos sobre
el valor de un titulo universitario y si vale la pena la inversión para
el estudiante. La situación en EEUU es bastante similar a la chilena. En
Chile, los costos de educación superior han aumentado en más de 60% en
terminos reales en los ultimos 12 años y las deudas estudiantiles son
muy altas comparado con otros países. Sin embargo, la inversión sigue
siendo buena para el estudiante, comparado con su alternativa, no tener
un titulo universitario. Como las instituciones saben, y no han
descubierto la formula para mejorar su eficiencia, siguen cobrando a los
estudiantes más.

Gregory

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The New Yorker
The Financial Page
Debt By Degrees

by James Surowiecki
November 21, 2011

The protesters at Occupy Wall Street may not have put forth an explicit
set of demands yet, but there is one thing that they all agree on:
student debt is too damn high. Since the late nineteen-seventies, annual
costs at four-year colleges have risen three times as fast as inflation,
and, with savings rates dropping and state aid to colleges being cut,
students have been forced to take on ever more debt in order to pay for
school. The past decade has seen a student-loan binge, so that today
Americans owe well over six hundred billion dollars in college debt.
That’s a burden that’s hard to carry at a time when more than two
million college graduates are unemployed and millions more are
underemployed.

Some of the boom in student debt can be chalked up to demographics: in
the past decade, the number of college-age Americans rose by more than
three million and the proportion of eighteen-to-twenty-four-year-olds
enrolled in college went from thirty-five per cent to forty-one per
cent. Still, the piles of student loans are due largely to the fact that
the cost of a college degree has been going up much faster than people’s
incomes. And that has raised the spectre that we might be living through
a “higher-education bubble,” in which Americans are irrationally
borrowing money to spend more on college than it’s actually worth.

We’ve just endured two huge bubbles, which sent the value of stocks and
then homes to ridiculous levels, so the theory isn’t implausible. Of
course, a college-education bubble wouldn’t look exactly like a typical
asset bubble, because you can’t flip a college degree the way you can
flip a stock, or even a home. But what bubble believers are really
saying is that young people today are radically overestimating the
economic value of going to college, and that many of them would be
better off doing something else with their time and money. After all,
wages for college graduates actually fell over the past decade, and the
unemployment rate for recent grads is close to ten per cent. That’s
hardly a ringing endorsement of the economic value of education.

There’s a big flaw in the bubble argument, though: things may look grim
for college graduates, but they’re much grimmer for people without a
college degree. Though recent college grads are having a hard time
finding a job, it’s much harder for recent high-school graduates, who
have an unemployment rate of nearly twenty-two per cent. And the
over-all unemployment rate for college grads is still, at 4.4 per cent,
very low. More striking, the college wage premium—how much more a
college graduate makes than someone without a degree—is at an all-time
high. In fact, the spiralling cost of education has to some degree
tracked the rising wage premium; as college has, in relative terms,
become more valuable economically, people have become willing to pay
more for it. It’s telling, in this regard, that the one period in the
past sixty years when college-tuition costs flatlined was during the
seventies, which also happened to be the one period when the college
wage premium fell.

This isn’t to say that eighteen-year-olds are perfectly rational
economic actors. Most obviously, many of them borrow a lot of money and
then don’t finish college, ending up debt-laden and without a degree.
But there’s little evidence that kids are systematically overestimating
the value of college, the way homeowners systematically overestimated
the value of homes during the bubble. Nor is there much reason to think
that a degree will matter less in the future: the demand for college
grads in the workforce has been increasing steadily for sixty years.

The bubble analogy does work in one respect: education costs, and
student debt, are rising at what seem like unsustainable rates. But this
isn’t the result of collective delusion. Instead, it stems from the
peculiar economics of education, which have a lot in common with the
economics of health care, another industry with a huge cost problem.
(Indeed, in recent decades the cost of both college education and health
care has risen sharply in most developed countries, not just the U.S.)
Both industries suffer from an ailment called Baumol’s cost disease,
which was diagnosed by the economist William Baumol, back in the
sixties. Baumol recognized that some sectors of the economy, like
manufacturing, have rising productivity—they regularly produce more with
less, which leads to higher wages and rising living standards. But other
sectors, like education, have a harder time increasing productivity.
Ford, after all, can make more cars with fewer workers and in less time
than it did in 1980. But the average student-teacher ratio in college is
sixteen to one, just about what it was thirty years ago. In other words,
teachers today aren’t any more productive than they were in 1980. The
problem is that colleges can’t pay 1980 salaries, and the only way they
can pay 2011 salaries is by raising prices. And the Baumol problem is
exacerbated by the arms-race problem: colleges compete to lure students
by investing in expensive things, like high-profile faculty members,
fancy facilities, and a low student-to-teacher ratio.

The college-bubble argument makes the solution to rising costs seem
simple: if people just wake up, the bubble will pop, and reasonable
prices will return. It’s much tougher to admit that there is no easy way
out. Maybe we need to be willing to spend more and more of our incomes
and taxpayer dollars on school, or maybe we need to be willing to pay
educators and administrators significantly less, or maybe we need to
find ways to make colleges more productive places, which would mean
radically changing our idea of what going to college is all about. Until
America figures out its priorities, college kids are going to have to
keep running just to stand still.


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Gregory Elacqua