College: The Next Major Economic Bubble?
As we enter the second decade of the 20th century, a greater percentage of the world's population has received a higher education than ever before. In fact, according to a 2018 Statista study, approximately 35% of the United States population has at least a bachelor’s degree, compared to a mere 20% in 1988 (Statistica). With the highest attendance growth being in traditionally underrepresented demographics, the rise in attendance will surely continue. Despite this increase and the benefits of an educated society the average cost of attendance in the U.S. is also higher than it's ever been. Over the same 30 year period, the average cost of attending a 4-year university has risen approximately 220% after inflation adjustment (NCES.gov). As a result, graduates today are often faced with crippling student debt, which when combined with a highly educated and competitive workforce, can sometimes make attending college a poor investment. As with any other investment, a bachelor’s degree in a certain field can be measured by ROI.
According to a Georgetown University study, business and STEM are the most popular majors among American college graduates, representing 26.1% and 19.6% respectively. Unsurprisingly, these two major categories have the highest career earning potential and nine out of the top ten occupations based on average base salary are in STEM fields such as petroleum engineering and aerospace engineering.
Conversely, majors within the humanities, social sciences, and teaching fields represent a smaller share of American graduates. More alarming is the trend that has taken shape since 1970, during which education majors have decreased by roughly 17%, social science and history majors by 11%, and English majors by 6%. These fields offer a below average ROI and as a result have seen a downturn in enrollment.
The rising costs of education have clearly influenced individuals in 2020 to pursue majors based on perceived security and ROI, not necessarily an interest in the subject itself. After all, the reason that people attend college is to obtain knowledge that can be applied to a career, ultimately boosting their earning potential. As a result, higher education is an asset. While passion for a subject is important in order for an individual to enjoy their career and live happily, the high prices of education and the competitive job market have forced many people to view whether they are willing to face financial burden of financing their education based on the return.
The result of the shift of American youth into STEM and business has led to a period of rapid innovation in these fields that will continue to take place. However, the shift out of the sectors previously mentioned will undoubtedly deplete innovation in those fields, which is unhealthy. These fields such as education, history, and social sciences are scholarly in nature and underdevelopment could potentially affect the quality of the education system in the future.
Additionally, picking a career based on ROI can ultimately lead to career dissatisfaction. A 2019 study conducted by the Conference Board revealed that only 45% of American workers consider themselves happy in their job compared to 61.1% in 1987, the lowest that it has been in over two decades. This is true despite record stock market performance and low unemployment rates. Furthermore, the number of Americans switching career fields is also at an all-time high. This data correlates to the rise in education costs, and shift between the percentages of students studying certain subjects. Career dissatisfaction often leads to decreased productivity, which can ultimately hurt the performance of companies and thus the economy altogether.
While college is a large investment, students today are sometimes required to choose between financial success and career happiness, similarly to how an individual would have to choose between investing in a fixed income security for safe financial growth or a sports car for pleasure. This decision will continue to become increasingly prominent as there have yet to be signs that the trends in job competition, pressure to attend college, or the costs of college will change. Additionally, if the costs of attending college outpaces the growth in the salary of certain professions such as education and the humanities, it may ultimately become a poor investment to study these subjects, creating a bubble within the higher education sector. Education is an asset, and the overvaluation of any asset class can lead to financial crises. The burst of an education bubble could have unprecedented and incalculable impacts on the global economy as the foundation of the future could potentially be in shambles. This is one of the reasons for education being at the center of contemporary American politics and, as such, the sector should be watched closely in the future.
Works Cited
“BankNews.” BankNewscom RSS, Bank News, 2019, www.banknews.com/blog/u-s-job-satisfaction-at-lowest-level-in-two-decades/.
Carnevale, Anthony P, et al. “The Economic Value of College Majors.” CEW Georgetown, Georgetown University, 12 June 2018, cew.georgetown.edu/cew-reports/valueofcollegemajors/.
“Digest of Education Statistics, 2018.” National Center for Education Statistics (NCES) Home Page, a Part of the U.S. Department of Education, U.S. Department of Education, 2018, nces.ed.gov/programs/digest/d18/tables/dt18_322.10.asp.
Duffin, Erin. “Americans with a College Degree 1940-2018, by Gender.” Statista, Statista, 9 Aug. 2019, www.statista.com/statistics/184272/educational-attainment-of-college-diploma-or-higher-by-gender/.
