After a previous post on the education bubble, which I called there the “schooling bubble,” I did a little more research. As a result of this research, I’ve come to some provisional conclusions:
They call it a “higher education bubble,” but I don’t think the bubble is really about higher education.
I think that when we say ‘education’ we mean ‘the thing that increases the likelihood of a (higher) wage’. Someone is educated if they have a better chance at selling their labor (for a higher price) on the job market.
Right now, four things are true: unemployment is rising, tuition is rising, salaries are staying the same, and the quality of education is falling. This means graduates of our education system–one whose price tag tends to be quite high–don’t have as good a chance at selling their labor (for a high price) on the job market as we think they do (that is, proportionately to education’s price tag).
We disproportionately value the extent to which education can assure us (high) wages. So it’s a bubble. But it’s a wage assurance bubble. (Thanks to Sarah Gallien for the word ‘assurance’. I was using ‘insurance’, but ‘assurance’ is much better suited for the purpose.)
Whether or not you want to call this thing ‘education’ is almost beside the point. (I’d actually prefer to call our education system a wage assurance system. Seems more transparent.)
The wage assurance bubble affects our entire wage assurance system. Kindergarten through graduate school. This is because (public) K-12 still has a cost; one which we typically pay with tax dollars. Tuition at universities also has a cost; one which we pay with both tax dollars and income. The whole thing costs us a certain amount. The point of paying that cost is to assure that people can sell their labor (for a higher price) on the job market. Unfortunately, for whatever reason, we don’t understand the imbalanced relationship between this cost and the actual value of what we’re paying for.
To sum up, this “higher education bubble,” at its empty core, is really a wage assurance bubble. Given certain economic facts, it turns out that we disproportionately value our wage assurance system (what we call ‘education’) in relation to its actual value.
(As a parenthetical reflection, this whole thing feels like an abomination. I once thought that education was a transformative, near-spiritual process of being human. But now, after reading and thinking about this, I seriously wonder whether ‘education’ is a transformative, adaptive, and life-changing activity. But now I think differently. Either there’s no good reason to call any of that stuff ‘education’; or, if we do use that word, then this process of transformation, adaptation, and change happens just for the sake of wages–not being human. In other words, the etymology of the Greek verb ‘educate’ is ‘to lead out’. There’s been some confusion as to what this means, philosophically. Now I know: for us, it means to lead out into the labor market. Simple.)
Below are some quotations and diagrams, and accompanying links, that contributed to these conclusions.
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Bubbles arise in nature when some sort of film, bolstered by surface tension, contains a pocket of air under greater pressure than the general atmosphere. Bubbles arise in markets when some factor external to the market (usually tax engineering or a regulatory mandate) creates a pocket of concentrated capital in which asset prices rise well above levels that can be justified by the assets’ underlying value.
–Jerry Bower, Forbes Magazine “The Coming College Education Bubble”
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The higher education bubble is a speculative boom and bust phenomenon in the field of higher education. According to the theory, while college tuition payments are rising, the rate of return of a college degree is decreasing,[1] and the soundness of the student loan industry may be threatened by increasing default rates.[2] College students who fail to find employment at the level needed to pay back their loans in a reasonable amount of time have been compared to the debtors under sub-prime mortgages whose homes are worth less than what is owed to the bank.[3]
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Well, we have a bubble in education. The costs have escalated by 300 percent, adjusted for inflation, since 1980. The quality has not gone up. So, we’re paying more and more for the same product. And it is something that is a bubble because it’s intensely believed.
It’s taboo to question education and to ask whether people are really getting their money’s worth. And it’s very analogous to the housing bubble. People are told that you have to have an education, it’s indispensable, it’s always valuable. We have subprime education, like we had subprime housing. But it probably is a system that’s gotten to be quite rotten all the way up.”
–Peter Thiel, Interview on PBS, May 2011
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There are few things as fundamental to the American Dream or as essential for America’s success as a good education. This has never been more true than it is today. At a time when our children are competing with kids in China and India, the best job qualification you can have is a college degree or advanced training. If you do have that kind of education, then you’re well prepared for the future — because half of the fastest growing jobs in America require a Bachelor’s degree or more. And if you don’t have a college degree, you’re more than twice as likely to be unemployed as somebody who does…
And yet in a paradox of American life, at the very moment it’s never been more important to have a quality higher education, the cost of that kind of that kind of education has never been higher. Over the past few decades, the cost of tuition at private colleges has more than doubled, while costs at public institutions have nearly tripled. Compounding the problem, tuition has grown ten times faster than a typical family’s income, putting new pressure on families that are already strained and pricing far too many students out of college altogether. Yet, we have a student loan system where we’re giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans.
This trend — a trend where a quality higher education slips out of reach for ordinary Americans — threatens the dream of opportunity that is America’s promise to all its citizens. It threatens to widen the gap between the haves and the have-nots. And it threatens to undercut America’s competitiveness — because America cannot lead in the 21st century unless we have the best educated, most competitive workforce in the world. And that’s the kind of workforce — and the kind of citizenry — to which we should be committed.
–Barack Obama, April 2009, as he announced the end of FFELP
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UW mentoring program helps dreams come true
By Karen Long, Seattle Times, January 9 2012
One day in mid-December, a purple-clad army of college students prepared to sweep through Renton High School, bringing snacks, drinks and most of all, information.
Laura McDowell marshaled the forces — about 50 University of Washington students — in the school’s counseling center, making sure they were all working on the same thing before they fanned out across the building.
“Have your students go to fafsa-dot-gov,” McDowell rapped out in a commanding voice. “Can anyone tell me what it stands for? Anybody?”
“Free Application for Federal Student Aid,” the students responded, not exactly in unison. Filling out the form is a necessary step to getting financial aid for college.
“Why do you have to fill it out?” McDowell asked.
The response was immediate: “Money!”
The UW students are part of the Dream Project, a 5-year-old mentoring program started by a handful of undergraduates in 2005. Since then, it has grown rapidly, and last year reached 1,300 seniors in 16 high-poverty Seattle-area high schools, many of whom would be the first in their families to go to college.
Recently, it received a $972,000 grant over a four-year period from the Bill & Melinda Gates Foundation.
About 500 UW students participated this past year, spending an hour a week in high-school classrooms to prep students on the SAT or ACT, help them fill out college applications and apply for public and private scholarship money. For those who don’t plan to go to college, the UW students help them think about what they will do when they graduate.
Washington has one of the lowest rates in the nation of college-bound teens — by one count, this state is 46th, with only about half of its graduates going to college directly from high school. The national average is 63 percent, according to the National Center for Higher Education Management Systems.
The Dream Project message: “We’re one, two, three years older than you. We just did it. You can do it, too,” said McDowell, who is a junior majoring in accounting and business administration and is coordinator of the Dream Project at Renton High.
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