From a reader:
Is the massive student debt impairing US social mobility? If someone takes out large student debt to get a sociology or history degree and then gets a job that makes it difficult to pay off the debt, doesn’t this make it hard to climb the social ladder? On the other hand if your parents fund your schooling, you’re more able stay in the upper middle class or climb higher.
You can inherit from your parents: genes; social norms (coming from them and also from the peers with which they surround you); wealth. School funding is a fairly significant component of inherited wealth nowadays, but it is not all of it. Moreover, I suspect that the other two types of inheritance matter more.
But suppose you do not have wealthy parents. Is going to college your ticket to upward mobility? My guess is that for some it is, but for many it is not. And for those who take on a lot of student debt, the net effect may be adverse.
For several years, I have believed that the higher education system impairs economic mobility. It certainly serves to segregate affluent young adults from non-affluent young adults.
I have long been fantasizing about ending the tax-free non-profit status of elite educational colleges, and using the increased taxes received to provide some form of debt relief to the students.
The stupid students. The stupid students who did borrow money, lots, yet didn’t major in a subject that was likely to result in them getting a job to pay the money back.
I don’t want the gov’t to help stupid decision makers choose poorly, yet there’s a real issue that past gov’t policy, and advertisement, news, culture, have all conspired to support the unwise decisions of millions of mostly normal kids to go ahead and borrow, lots, for college. They ARE responsible; but so is society, to some extent. And especially rich colleges.
I’d like to see increasing taxes on rich colleges until there’s a huge reduction in student debt, based on colleges having more “skin in the game” for both their students, and all students. Yeah, Harvard should be paying, a bit, for (?) Maine Maritime or Alvernia U, among the worst for high avg debt and high percentage taking out loans.
https://www.usnews.com/education/best-colleges/the-short-list-college/articles/2018-03-13/10-colleges-where-graduates-have-the-highest-debt#close-modal
I also support programs which allow students to discharge some increasing percent of their student debt after years at below median income, and make the colleges more responsible for those loans. A specific example from Maine. Years after graduation – 5. Debt – $45,000. “Protection Relief” adjustment: student new debt $15,000; Maine Academy now owes $15,000; “failed college fund” (from richer than average colleges) owes $15,000.
We need colleges to take the lead and advise prospective students NOT to enroll if they’re going to go into debt and likely not pay it back. Colleges will only due this if they have to pay more for the failures.
It’s also true I don’t like most elite colleges now, including my own alma mater, and would love to see a gov’t program that punishes them more for the PC failures.
I see this issue discussed a lot but rarely any discussion of the supply-side. We have a shortage of credentials for a variety of reasons – I think our efforts should begin there.
What’s missed in a lot of these discussions is dissenatngling Major/Institution quality / and debt load – English it’s not unheard of to see English or History majors as analysts at top investment banks , but they went to an Ivy League school…point being institution quality*major=marketability, if that is a high- it can support borrowing, if it is low it can not…
In terms of economic mobility, I try to remember two points: First,
1) High economic mobility is not the historical norm and there were stretches of it in the Late Gilded Age and the Post WW2 boom. (And from history books the high economic mobility is exaggerated and the the post WW2 boom came from the dual experience of Depression and WW2/Bombed Europe made everybody feel upward economic mobile. The late 1990s had the same reality.)
2) Economic mobility also means people going down in class. (And we focus way too much mobility of high upper class and elite colleges here.)
So why
1) It is historical norms not to have too much economic mobility. And the claims of assortive mating today are very exaggerated and modern measurements of assortative mating are wrong. (ie We regard the Clintons as assortative mating while the George/Barbara Bush are not in term of education. The Bushes were very assortative in past definitions.)
2) The birth rate falling is coming from the lower class families. Young marriage and parenthood are not common. (In terms of the direction of California as a society, I recommend that our state is becoming closer to Far East Asian tiger economies.)
3) I am struggling to see how avoiding college is going to make the average citizen more economic mobile. (Again we are looking at extreme cases instead of the average case.)
What I am seeing in the modern economy is we need more quality working class employees and we don’t have enough incentives for good High School students to directly in the work force. And I don’t see the US private sector choosing to solve this (yet?)
Hang an extra year, knocking off some requirements in the local junior college.
For the college bound this at least makes the bogus requirements cheaper and less painful. In fact, given the political nature of most universities, I would be suspect of a smart kid who did all fours years on a campus, sort of wasteful. What wealthy parents are stupid enough to think four years of Harvard, on campus, indoctrination is good?
There should be a wealth of good data out there to test questions about this. There are huge variances in states and how they fund higher education. Do these variances correlate with different debt loads? And with different outcomes for mobility?
Student debt is crushing, but it does not have to be. Tuition at my university (a fairly high quality R2 school) is about 32,000 for a 4 year degree. The R1 state school down the road costs about 50,000 for tuition. Is that a lot? yes. But it would not lead to levels of debt that are crushing if the student was responsible with money and worked a bit and studied something useful.
‘Social Mobility’ is another one of the concepts that needs the ‘rectification of names’ treatment to avoid confusion. For the reader, is it about ‘meritocratic justice’, or the kind of job or income the individual earns given their potential, or about consumption lifestyle, or wealth accumulation? If a poor kid and a rich kid end up at the same law school and then as associates at the same law firm with the same pay and prospects, but the poor kid has to service a big debt, did he fail to achieve ‘social mobility’?
As with health care, the fundamental problem is one of cost, and we have to ask why advertised tuition rates and other prices have gone up so much (knowing that, as with health care, what the universities actually charge each individual varies widely and is somewhat of a mystery.)
My answer is “because they can” – a degree is practically a license to work, and the value of the credential could rise all the way to the eNPV of that benefit. The only constraint is affordability, but if a supply of unlimited, no-questions asked credit is available, that constraint goes away. Which it has.
“Handle” is on to a key point: “a degree is practically a license to work”. As Bryan Caplan has pointed out, it is also in part an important means of signaling a certain kind of subservience that is valued by corporate managers who want to make their own existences easier. It signals, for example, the ability to put up the with the abundant ritualistic nonsense – such as sitting still and pretending to be interested while someone drones on and on and on in words that will be utterly forgotten in a few hours or days – that goes on in corporate settings.
It also often epitomizes the rampant credentialism in today’s USA and other societies, driven in part by a medieval guild mentality intended to “protect” incumbents. Just like the other sort of protectionism, credentialism reduces the general standard of living by wasting vast quantities of time and resources on misuse of resources. However, it does makes incumbents feel special, which is a big part of the point.
As autonomous machinery and so-called AI (which is well-hyped but doesn’t truly exist yet, but let that slide because ‘true’ AI is not needed to replace nearly all jobs) proceed, the Gordian knot will become ever more, well, knotty. Ever-increasing aggregate wealth alongside widespread loss of socially acceptable claim on said wealth is a sure recipe for social explosion. Look for the Gini coefficient to collapse to essentially zero as every more and more revenue is concentrated worldwide by our 18th-century copyright and patent laws onto maybe a dozen owners of the terabyte-sized software systems that will be labelled AI. And yet, no form of socialism or “socialism”, i.e. distribution of wealth without clearly “working for it”, has ever worked historically, so there’s no precedent for supporting people en masse as they become almost useless economically.
This will be a very difficult century. Radical technological transformation has had a history of difficulties. What’s new is an utterly runaway pace of change – no one could possibly continually acquire one fresh college education after another, as many commentators who moan about the “quality of the workforce” almost seem to suggest. They simply can’t be paid for when instant obsolescence means one can’t really ever transition into applying them – and when ridiculously overzealous occupational licensing (and virtual licensing) mean that the old “learning how to learn” is no longer part of the picture since it doesn’t offer formal, legalistic credentials.
Good luck, everyone.
Even with the preponderance of student debt with dismal employment prospects accompanied with it, I’m surprised how many kids continually go into low quality majors from non-elite institutions right now. I see this at the grad-school level as well.
My feeling is that society-wide perceptions about this sort of thing really do lag empirical reality by a few decades, and coupled with the inability of college alternatives to get the same credential acceptance as traditional universities, and the whole thing keeps chugging along well past its “Best if Used By” date.
My feeling is also that non-collegiate credentialing alternatives are quietly picking up steam, but the combination of loss aversion and status-quo bias means the whole ecosystem will have to outperform its more traditional counterpart for at least several years before you get the necessary equilibrium switch that’ll put the two on equal footing.
As Taleb points out, higher education does, or did, work to help the children of those who were successful in making money to remain in the middle class. The cutoff may be changing given the poverty inducing effects of high education debt loads. Obviously, family connections can offset the impact of the modern liberal arts program failure to even develop writing, speaking and clear thinking skills in so many student.
“A merchant makes money, then his children go to the Sorbonne, they become doctors and magistrates. The family retains wealth because the diplomas allow members to remain in the middle class long after the ancestral wealth is depleted. But these effects don’t count for countries.”
Taleb, Nassim Nicholas. Antifragile: Things That Gain from Disorder (Incerto) (
This may be helpful to readers here:
http://www.er-doctor.com/doctor_income.html
It shows how anyone can put in the same diligence as taking a university education to a professional qualification by working a double shift. For example this could be a van driver working for the same length of time and investing the income from the second shift. After this “education” is over, then his income from the investments added to single shift working equals that of the university educated professional.
Do your social climbing while in college, where your poor financial circumstances will be less of a factor than after you graduate.
My guess is if you aren’t smart enough to figure out that your student loan debt will be a big burden relative to typical career options in your field of study, you’re not on a path of upward mobility.