The author is not dealing with those who are receiving degrees with skills that businesses in the 21st century needs, but those that don’t have such skills after 4 years.
He asks -— what do you get for your money? No one knows for sure. Certainly college grads make more on average than non-college grads. Less than $5,000 per year initially, on a take-home pay basis. That’s not much, and it’s the reason why you don’t typically break even on tuition until the age of 35.
It’s also one of the reasons for the new “broke at 30” and “boomerang generation” trends. It is impossible to know exactly how much of that small difference in income is due to the degree and not due to the talent and tenacity of the graduate. The author went for the conservative estimate and assigned $2,000 per year to the degree.
Some critics complained that this is an initial earnings number, but that’s how price-earnings ratios work. They’re supposed to be based on cash flow, not hope. Over time the college degree earnings surplus (College Education) generally grows, but so, generally, do stock earnings. So, generally, do non-college-degree-holders’ earnings.
He also Of acknowledges that some degrees are better than others. Generically a bachelor’s degree holds a value of roughly 100 to 1, price to earnings, but an engineering degree is certainly more attractively valued. Accountants and actuaries are also looking at a better proposition, as are a number of other generally mathematically demanding careers.
But in finishing the math: If the average P/E hovers somewhere around 100 and there are occupations which represent a much lower P/E, then by the simple logic of averages, there must be a countervailing set of P/E’s over 100. In other words, the more vehemently you make the case that a chemical engineering degree is a great deal, then the stronger is the case that sports communication (e.g.) is a rotten deal. That’s the only way to keep the average where it is.
Of course, there are the difficult to quantify social benefits. And there are the impossible to quantify intangible benefits. But precisely how much money are we willing to allocate for these incalculables?
Assuming a parent had $200,000 for a kid’s college education in an expensive private university, what would be the better proposition, setting him/her up in her own business (maybe a franchise), or having him/her major in English or French literature?
And therein lies my biggest point over the past couple of years. Having two Master's degrees myself, I can see how much the MBA-mills keep churning out year after year. It's a supply and demand thing.
To the parent of the truck driver, I would suggest you offer the kid the same financial opportunity afforded to the older kids ... with the initial investment, your son could have at least 1 tractor-trailer rig (maybe more) and the ability to earn even more that starting wage from the outset. If he is as productive as his siblings, then he will be out-earning them by the time he reaches 40.