Sunday, July 14, 2013

Economics and morality of price discrimination in college tuition

It seems that every other day, we see a story of recent college graduates being overwhelmed by massive student loans and limited job prospects.  As a result we see plenty of critics decrying both the universities and the graduates from them for some of the following reasons. This is not an exhaustive list. 

1.) Education itself hasn't changed, but the price has skyrocketed.  
2.) Students have unrealistic expectations of what  4 year college programs will do for them and don't prepare themselves for the practicalities of the job market. (I was told I would learn to make cookies)
3.) They don't choose practical degrees or there are too many people majoring in one or two fields (Capitalism: survive or die, love it or leave it #'Merica).

But that can't be the full extent of the problem.  Not all job markets are equitable for degrees and not everyone's qualifications guarantee them an equivalent job.  Some degrees require a masters/PhD, MBA, CFA, and others don't need graduate degrees at all.  So we have to find a way to make accurate comparisons between different degrees and find a more market-friendly solution.

It's still the same apples, just twice as expensive.
This begs the question of how is what we're learning today, different from or better than what our parents learned  20-30 years ago?  In some of the more job market friendly degrees such as engineering, computer science, or medicine, we can perhaps understand the economic justification behind higher tuition.  Why?  Because these areas have benefited the most from technological growth between say, 1980-2013.  Capabilities and modernization of tasks in the job market mean roughly equitable increases in salary, without considering inflation.  Naturally a university would think that they would want to see a greater return of investment on educating these future infrastructure developers, doctors, and potential startup creators.  After all, where would these men/women be if it weren't for universities.

The same can't be said for other degrees such as those within humanities.  Despite the intellectual value and critical appreciation one could earn from studying in these fields, often times there isn't a whole lot of tangible growth or difference between what a humanities major learns today as compared to 20-30 years ago.  Because salaries and career opportunities in those fields was high and cost of education was low back then, people saw a satisfyingly high return on investment.  Not as high as some of the more technical majors, but enough to justify their passion in art history.  Now the cost of education has risen, the economy has slumped, people are more tech oriented, and thus opportunities are low.  Same apples from 20 years ago, except they've gone a bit too ripe, and they're twice as expensive

What would you say, you [can] do here?  
There's a memorable scene in Office Space in which an employee struggles to tell the consultants what exactly he does for the company.  Needless to say he gets laid off later on, but sadly this is how a lot of companies see college graduates nowadays:  Smart kids, but not necessarily valuable.

This is a big problem.  Universities have either attempted to absolve themselves of responsibility by hiding behind the tag of 'learning institution' or they have advocated a higher level thinking approach by instituting core requirements.  While students aim to learn there, that's not usually the sole purpose for them to take on $40,000+ in debt.  It's not enough for them to see how the chocolate chip cookie evolved and changed over time, they want to learn how to make it.  Should it be a university's obligation to incorporate practical elements such as how to use Excel, Salesforce, PhotoShop, Java, Python, etc or how to get the most out of that cool internship? Or is that entirely the responsibility of the students to make themselves valuable assets?  The truth, as with a lot of things, lies somewhere in between.  It's hard to gauge what students would need since universities can scarcely predict what a student wants, but it will eventually hurt those universities' future returns on investment if students recognize that these 4 year programs don't meet employer expectations anymore at some basic level.

(Continued, see next post)

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