Friday, April 20, 2012

Is working through school still a viable plan?

Prices have risen for education in the past thirty years:
Representative Foxx would have paid $279 for the academic year—about $2,140 today. That’s about equivalent to what students pay right now at community colleges, not public four-year institutions—especially not public flagships.  
In-state students at Representative Foxx’s alma mater pay $7,008—more than three times what Foxx paid. It took Foxx seven years to graduate, probably because she was working to put herself through college. During the 7-year period she was at UNC, tuition and fees increased about 0.6 percent per year. Compare that to UNC students who have seen their tuition and fees increase on average 7.2 percent per year since 2005. UNC students who take fewer classes in order to subsidize their tuition through work have found themselves in a losing battle with steep tuition increases.  
They have also come up against work that pays less and less. When Representative Foxx was working her way through college, the minimum wage was worth about $9.62 in today’s dollars. Today’s students who work minimum wage jobs earn about 30 percent less per hour while paying much more in tuition. If Representative Foxx worked 20 hours a week for an entire year during her time at UNC, she would have made approximately $9,795 before taxes, which would probably cover her entire cost of attendance. Using the same calculation, a student today working 20 hours a week for an entire year would make $7,176. This would barely cover tuition and fees. It wouldn’t even make a dent in the estimated full cost of attendance of $20,660. Indeed, if a student worked 40 hours a week, a situation not feasible for a full-time student, he would only net $14,352—still leaving a considerable gap. That gap is exactly where student loans have come into play.
 I think that this (long) piece illustrates a few things (and neglects how the difference in costs for state schools is heavily driven by less state support for higher education).  One, is that there is a huge difference between $2,000 year (five years of school = $10,000 in tuition) which leaves manageable levels of debts (as I have seen people pay off $10,000 in debt).  Two, the return on unskilled labor continues to drop. 

The drop in unskilled labor compensation have two syngeristic effect.  First, they make working one's way through school even less viable.  Second, they make the opportunity cost of not getting a degree much higher.  When you couple this loss of value of unskilled labor with a dramatic rise in tuition, the real story seems to be that the rational choice seems to be to focus on being successful in school (to rise your eventual market wage) and give up on working.

This is not, as Representative Foxx seems to suggest, a loss of virtue among the youth of today.  Instead it is the best strategy available (among a set of bad strategies).  However, it is also predicated on having good information on the real value of special educational pathways.  Since guessing the job market in four years is always a "crap shoot", it just about guarentees a certian proportion of students will end up with a lot of debt and no way to pay it back. 

Most of this problem could be fixed on the tuition side as it is clearly the larger problem.  If state schools cost 2000/year and tuition was stable then working one's way through school would make a lot more sense. 


  1. I don't think you've commented on the role of innovations like Coursera and Udacity. Might be promising? I won't be surprised if employers start seeing those as relevant credentials in the not-too-distant future.

    (Credentialing vs. educating is a whole other thing, I know. I'd like them to have success at both.)

  2. I suspect that these newer options might lead to productivity improvements in education. I definitely think that things like the online version of MIT are going to be interesting to watch