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June 27, 2013
Guest Opinion: College, alas, is unlikely to make us more equal

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(June 27 -- By Peter Schrag, Special to the Bee)

Even with the sharp increases in tuition of recent years and the spiking debt that students incur as a result, higher education at California's public universities is still a wise investment.

That, at least, is the conclusion of a new report from PPIC, the Public Policy Institute of California. But it may not be the whole story.

Certainly it's what most Californians seem to believe: the students at the University of California and the California State University and their parents, and the thousands of others in the state's private universities and those who want to go there.

Yet despite the blather of politicians and a great many business people, higher education, no matter how accessible or desirable, may never again close the huge and growing gaps in income and personal wealth either in California or in the nation as a whole. As new technologies come on line, they may only broaden those gaps.

Nor are all college degrees equal in bringing in hefty incomes.

A report last month from the McKinsey Global Institute lists 12 "disruptive technologies that could drive truly massive economic transformations and disruptions in the coming years." Among them: advanced robotics, "automation of knowledge work," 3-D printing, "the Internet of Things" (greater industrywide interconnectivity of machines and devices) and the use of "autonomous or near autonomous vehicles" that can be operated with little or no human intervention.

"The massive economic transformations" created by those technologies include major impacts on the labor force. "The half-life of skills," the report says, "is shrinking."

The McKinsey report estimates that advanced robotics could save $6 trillion in manufacturing employer costs (19 percent of global employment costs). Those are jobs and employee wages.

As the half-life of skills shrinks, will today's projections of the return to educational investment hold up a decade or two from now?

Will the debt that today's students graduate with - debt that requires the new home, the new car and everything else to be deferred - be worth the kind of education it's still paying for? If student loan interest rates double next week, as they're likely to, that question becomes even more worrisome.

Probably one implication of the changes in the skills that new technologies require is that the more specialized the skill, the more rapidly it becomes obsolete. Thus general education - the liberal arts - may again become worth more and employers will, as the McKinsey report suggests, again have to invest more in training their own workers.

And as the PPIC report points out, not all degrees are equal. A major in engineering or computer science is worth a lot more than a major in education.

The net payoff in lifetime earnings for a graduate in engineering compared to someone with just a high school diploma is $1.15 million. For a business major, it's $800,000. For a major in education, the net lifetime payoff is $240,000 - roughly $6,000 a year over a 40-year career. (That difference tells a lot about our values - and about the difficulties of our schools).

And, as might be expected, the more advanced the degree, the bigger the payoff. For the student now graduating with $25,000 or more in debt, as many are, the net returns from a low-paying profession like school teaching aren't that great.

The trouble with all such comparisons - rarely mentioned in any context - is that the payoff of a good education is much broader than what can be measured in dollars. That's certainly the case for the liberal arts, but it should be true in other fields as well.

"For every dollar California spends on its public colleges," according to one study cited in the PPIC report, "it receives more than four dollars in additional tax revenue generated by college graduates." But the social returns - in civic engagement, in support for a richer culture, for the arts, for generous public services, for environmental protection and enhancement - are even greater.

Nonetheless, the emphasis on economic returns to individual graduates conceals the more fundamental concern: The growing gaps in incomes not just between high school and college graduates, but also among the college graduates and, more broadly, between the returns to capital and labor.

PPIC's projections, made in prior studies, indicate that unless California boosts its production of skilled workers it will not have the labor force to sustain its economic competitiveness in the future. What's less well known is that in recent years, Asian immigrants to California have outnumbered Latinos by more than 2 to 1.

In 2011, 57 percent of California immigrants came from China, Taiwan, India and the Philippines, 22 percent from Mexico and other Latin American countries. Those immigrants reinforce the likelihood that a growing share of our skilled workers will, as in the past, come from elsewhere.

That immigration also adds to concerns that demand for skilled workers will not necessarily drive up wages or close income gaps. Combined with increased outsourcing of skilled work, it may in fact depress wages for skilled workers.

None of that undercuts the argument for greater investment in education, both by the state and by private individuals. But reducing gaps in income and wealth will almost certainly have to come through social policy.

Education alone won't do it.

Peter Schrag is a former editorial page editor of The Bee.

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