Education Meltdown
With AI emerging as a threatening competitor, how you spend your college years matters more than ever — which makes the spectacle unfolding across elite campuses appallingly ironic.
“We don’t need no education” Pink Floyd, The Wall
Raging fools
What an appalling, depressingly ironic spectacle.
With AI emerging as a potentially formidable competitor for knowledge workers, you would expect college students to feverishly try to acquire skills that offer better chances of earning a livelihood. Instead, many are busy staging demonstrations in support of Hamas, a terrorist organization responsible for heinous and savage acts of racist violence.
“All we need is thought control” would now be a more appropriate second line for the Pink Floyd’s song.
The protests have been widespread and disruptive, especially on elite campuses like Yale and Columbia — the latter has chosen to retreat into online education. The openly antisemitic tone of the demonstrations, including explicit threats of violence, is intolerable. The hypocrisy of university professors, administrators and students who after obsessing about microaggressions now tolerate or perpetrate blatantly racist aggression is despicable.
Similarly shocking is the ignorance showcased by many of the students who join these demonstrations without having any idea of what is actually happening in the Middle East, or even, in some cases, of what they are protesting for. I’ve been skeptical on the potential of Generative AI, but these humans set a pretty low bar…
College premium or discount?
In a recent excellent piece,
notes that we might be witnessing a structural decline in the value of the education offered by US elite universities compared to those high quality public universities that remain focused on building skills. And the value of college education overall seems to be falling.The San Francisco Fed documented last year a decline in the college premium, the extent to which the earnings of college graduates outpace those of workers with only a high school degree. The college wage premium flattened out after the 2008 Global Financial Crisis and started to decline after the 2020 pandemic.
Source: San Francisco Fed, “Falling College Wage Premiums by Race and Ethnicity”
Let’s take a closer look at the issue:
According to the SF Fed study, the decline in the education premium has been driven largely by a faster rise in high school wages. College wages have kept rising, but high school wages have risen at a faster clip as a tighter labor market boosted demand for lower-skill jobs. Still, it’s the comparison that matters: a college degree delivers a smaller financial advantage than it used to;
The college wage premium remains substantial. The latest data point indicates that wages of workers with at least a college degree are 75% higher than those of workers with only a high school degree. However, college education does not come cheap, and one should scale its financial return to the financial investment needed, often in the form of substantial student debt;
The college premium is not uniform. The SF Fed study notes that the premium is substantially higher for Asians, at over 110%, compared to about 70-75% for Whites, Blacks and Hispanics;
Source: San Francisco Fed, “Falling College Wage Premiums by Race and Ethnicity”
Tell me what you study…
The stark difference in the college premium between ethnic groups suggests that what you study in college matters — a lot. In the following chart, for each ethnic group I have plotted the share of degrees in Science, Technology, Engineering and Mathematics:
Source: National Center for Education Statistics, Digest of Education Statistics 2023 (Latest)
Of all college degrees earned by Asian students, close to 40% are in STEM, double the average for all students and substantially higher than all other ethnic groups. Over one quarter of Asian students get their Master’s degrees in STEM, again a much higher share than for other ethnic groups. Only in PhDs the share for Asians is marginally lower than for Whites and students of two or more races.
The reason why Asian students get a larger financial boost from post-secondary education might well be their higher propensity to study science and engineering, which open up better job opportunities. A recent academic study confirms that engineering and science majors (especially computer science) offer the highest rates of financial return. More striking and sobering, a 2021 report by the Foundation for Research on Equal Opportunity finds that for one quarter of college degrees the financial return is negative: factoring in the cost of education, one quarter of student would have been financially better off not going to college (psychology, art, music and religion fare the worst). This holds even for some Ivy League degrees. This is a truly shocking statistics, and helps explain why student debt cancellation has remained a political priority for the current Administration.
The conclusion is clear: going to college is overall a good choice, but how you spend your college years will make a massive difference to your future. Acquire the right skills, and you’ll double your earning power. Graduate with non-marketable knowledge, and you would have been better off not going to college at all — in fact you might have dug yourself deep into a debt sinkhole. This difference is likely to get starker as technology keeps reshaping the labor market.
A signaling game
The value of a college education lies not only in the actual skills you acquire; it’s also a signal of your learning abilities, grit and values. The signal broadcast by elite universities these days is the clearest that any prospective employer might wish for — and employers are beginning to take notice.
That wage premium chart by race is a shocker.