The Federalist Review

The Friday Letter / Issue #178

Education Pays—Up to a Point

Statistics that imply you’re always better off
with more education are highly misleading.

George Leef and Jenna Ashley Robinson / John William Pope Center

The latest data from the Bureau of Labor Statistics show that, for many people, increasing their level of education pays off in higher earnings and lower unemployment rates.

Looking at the chart (which appears on the BLS site) it seems obvious that the path to financial success is to get a college degree—and then an advanced degree. The more education you have, the better off you’ll be. High school graduates, for example, are almost twice as likely to be unemployed as college graduates, and they earn substantially less money per week.

Justin Wolfers, an associate professor of business and public policy at the Wharton School used the BLS data to tweet, “Hey kids, stay in school. What would happen if we put this poster in every classroom?”

Wolfers was reiterating the conventional wisdom, reinforced by the BLS data, that the longer an individual stays in school, the better off he’ll be.

Unfortunately, he missed a crucial detail. All of these statistics are the median—representing the person separating the higher half of a sample from the lower half. It’s a mistake to assume that the median tells us what most people in that group will experience.

Thinking of the median as “typical” masks a lot of important details about educational outcomes.

To start with, note that the data are 2010 median weekly earnings for persons age 25 and over, and earnings are for full-time wage and salary workers. So, everyone is lumped together—regardless of age, the school they attended, their major discipline, their academic performance, and even the field in which they’re working. And anyone working part-time is excluded entirely.

Breaking the data down further is illustrative. Among workers making $20,000 or less annually, 6 percent have master’s degrees or higher, 14 percent have bachelor’s degrees, and 9 percent have associate’s degrees. Among those making between $20,000 and $35,000 annually, 5 percent have a master’s or higher, 15 percent have a bachelor’s, and 11 percent have an associate’s degree.

Those individuals are earning well below the medians for their educational levels. Staying in school didn’t necessarily pay off for them.

The chart also hides an important phenomenon that has become increasingly common in the last few years—unemployment and underemployment among people who have college credentials. As this Gallup poll indicates, as of July 2010 almost 14 percent of those surveyed who had B.A. degrees, and over 10 percent of those with postgraduate degrees, were unemployed or underemployed.

Another reason why the BLS chart is misleading is that it lumps together people of all ages, who are at different levels. People with professional degrees, for example, includes many lawyers who earned their degrees years ago, many of whom have high earnings (the median is $1,610 per week or over $83,000 annually. That information is of no relevance to a brand new J.D., who faces a job market that has shrunken greatly in the last few years. Many recent J.D.s are scrambling to find any job at all.

Furthermore, returns to higher education have been declining for more than 10 years, according to the U.S. Census Bureau. Median starting salary for bachelor’s degree recipients in 2009 and 2010 was just $27,000, down from $30,000 in the years 2006 to 2008. The chart gives us a snapshot in time, but trends also matter, and the trend is downward for college degrees.

Earnings also vary greatly depending on the student’s major. Data from the U.S. Census Bureau show that median earnings run from $29,000 for counseling-psychology majors to $120,000 for petroleum-engineering majors.

Is it “worth it” to spend the time and money for a degree in petroleum engineering? If you can do it, probably “yes.” But is it “worth it” to get a counseling degree? That’s far from clear.

Earnings vary based on the college or university attended. Last year, the Pope Center compared schools in terms of their graduates’ salaries in an NCAA Tournament of Starting Salaries. Even this unscientific (but representative) sample revealed large differences between schools—from $29,748 at UNC Asheville to $57,470 at Duke University.

Again, looking only at median figures obscures important details.

An individual should not make decisions based on aggregate data, but rather on data pertinent to his or her particular circumstances. Consider Sue, who just finished high school. Should she go to college? The median earnings for Americans who have already gotten college degrees is irrelevant to Sue.

She needs to think about the cost of college and her own prospects, given her abilities. Nothing in the BLS chart sheds any light on her specific costs-versus-benefits comparison.

Given all the variables, telling all kids to “stay in school” is often bad advice.

Read this piece and others at the Pope Center website.

The Friday Letter / Issue #177

Ignoring the lessons of Frederic Bastiat

Stephen Combs / Federalist Review

“Like others,” George Mason University economist Walter E. Williams noted in his 2007 forward to The Law, “Bastiat recognized that the greatest single threat to liberty is government.” More than 160 years have passed since the death of the French economist who laid the foundation for America’s constitutional attachment to the Rule of Law. A sad day in world history occurred Sunday when French voters rejected Frederic Bastiat’s lessons and ignored his warnings. They elected a socialist president who is certain to destroy what little is left of French personal sovereignty.

Socialism, an economic system under which government controls the means of production, depends on coercion – government thuggery – to exist. Free people do not invite socialism. It comes about only by government’s ability, through lies and deceit, to convince insecure people that government can take care of them better than they can take care of themselves. Once in power, socialists use the threat of violence to take from the people, Bastiat explains, “their personal independence by slavery, their liberty by oppression, and their property by plunder.”

The European press concludes that President Nicolas Sarkozy’s defeat was a rejection of his and German Chancellor Angela Merkle’s response to the 17-nation Eurozone financial crisis: Cut government spending. Sarkozy also fought for immigration controls. During his 5-year term France’s Muslim population grew to about 9.6% of the total, according to the BBC. When uneducated, unemployable young Muslims began rioting, he called for tolerance but told Muslims they must embrace French culture and avoid “ostentation or provocation.”

As reported by the Washington Post, Sarkozy was blunt. The burqa, he said, “has no place in France.”

Incoming Socialist President Francois Hollande won on a promise to dismantle the Sarkozy doctrine – austerity measures, protection of French culture and language, policies to foster economic growth through free markets. M. Hollande wants a tax rate of 75% on the rich, an easy sell to a population raised on the belief that prosperity comes from the government, and that the rich, who got that way in a zero-sum game of stealing from the poor, should be punished. The result, any freshman in one of Dr. Williams’ macroeconomics classes could explain, will be a rapid and decisive flight of wealth to more hospitable territory, a move that will produce less, not more, revenue for the French treasury. Hollande’s goal is wealth redistribution, not revenue growth.

Shortly after the election, President Obama congratulated M. Hollande and invited him to the White House. Sarkozy had met with Obama but was repeatedly rebuffed at efforts to get a White House invitation.

Obama’s plan for a socialist United States arguably differs from Holland’s only by degree, and by timetable. It is difficult to argue that Obama’s move to nationalize General Motors, nationalize the student loan program, exert more control over banks, nationalize health care and destroy federalism are not moves to create a socialist state. We must stop pretending otherwise in the name of political correctness.

One wonders if French are familiar with Frederic Bastiat and The Law, whose modern subtitle is The Classic Blueprint for a Free Society. If the French public school system is anything like ours, they’ve probably never heard of him.

You see, the real problem is that man instinctively yearns for freedom, not servitude. And yet, as Bastiat points out, “it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others.” This is why the war for freedom is never permanently won. When people learn that it is easier to live off the toil of others, government is only too eager to accommodate them – through plunder.

The greatest evil, Bastiat warned, is conversion of the law into an instrument of plunder. Government does this through abuse of eminent domain laws, with sharply progressive tax rates, punishing regulation and a myriad of other schemes. These are lessons for today, for us. “All the measures of the law should protect property and punish plunder,” Bastiat said. We must stay keenly focused on this idea as we head into our own elections six months from now.

Steve Combs is editor of the Federalist Review. Reach him at combs@fridayletter.com.