Should we subsidize higher education? A response to Jeff Sachs

Willy Oppenheim is a doctoral student in the Education department at Oxford University, and the founder and director of Omprakash. Willy’s research has included fieldwork-based projects in Tibet and India,and archival projects focused on Brazil and South Africa. His current research concerns the demand for girls’ education in rural Pakistan.

In Monday’s podcast, Professor Sachs makes a valuable effort to avoid two extremes that have become prevalent in today’s popular explanations of our economic woes: either that we need ‘less’ government, and that we should cut taxes, entitlements, and regulation, or that we need ‘more’ government, at least in the critical areas that matter to the so-called 99%.  Sachs suggests that both positions are oversimplified and that the critical question is not ‘if’ government should intervene in market processes, but rather what forms this necessary interaction should assume.  However, Sachs himself might be guilty of oversimplifying certain aspects of this question, and I want to highlight one particular aspect today.

Around the 30 minute mark of the episode, Professor Sachs cites some startling numbers about access to higher education in America, and he convincingly shows that bachelor’s degree attainment rates are unequally distributed between white and non-white populations.  Echoing a common grievance of the Occupy movement, Sachs implies that smarter government spending would include interventions in the market for higher education so that post-secondary degrees become more accessible and affordable for everyday Americans.  Later, around the 35 minute mark, Sachs adds that manufacturers in the United States are “crying out” for skilled workers but that few can be found. The solution seems so simple: more government investment in higher education would mean more jobs for more Americans and more prosperity for all. This basic assumption of human capital theory has driven government investments in education around the world for decades, so one can hardly fault Sachs for referencing it in the podcast. However, like most neat theories, it happens to be grossly oversimplified.

There should be no question of whether or not we should worry about the discrepancies in educational attainment between white and non-white Americans, or between Americans from high-income and low-income families: we should.  Likewise, there should be no question of whether or not governments should work to improve the relevant skills and knowledge of their future labor forces: they should.  However, acknowledging these points is not the same as arguing that it makes sense for governments to directly subsidize the costs of conventional higher education.

First of all, abundant research suggests that investments in education produce higher social returns when directed towards lower levels of education — even all the way down to early childhood education (e.g., the American federal Head Start program).  Such research doesn’t in itself rule out the logic of investing in higher education, but it does suggest that investing in higher education probably won’t be the most effective way to address the achievement gaps that Sachs references.

Secondly, and more to the point: recent research has shown that the relationship between skills, knowledge, and jobs is more complex than we tend to imagine.  Numerous publications by Oxford University’s SKOPE institute have shown that the United Kingdom government’s efforts to promote skill acquisition through investments in higher education have resulted in a relative over-supply of skills and a lack of demand from companies for more skilled (and therefore more expensive) workers.  Some economists and academics in America have begun to worry about ‘degree inflation’ and the decreasing value of a bachelor’s degree — or even a master’s degree — in today’s labor market.  Some even argue that too many Americans go to college and that they would be better off pursuing less conventional forms of skill acquisition and avoiding the burden of student debt.  An interesting debate on the topic, along with a number of related articles, can be found at Intelligence Squared.

So, what’s my position?  How about this: rather than intervening in the education/labor market by incentivizing young Americans to sacrifice time, money, and credit for a degree that employers may or may not actually value, what if the government instead created more incentives for employers to train high school graduates (or even high school students) through programs such as apprenticeships and internships? This sort of initiative is a far cry from the sort of hands-off, ‘trickle-down’ logic of Reaganomics that Sachs rightly delegitimizes, but it can also be distinguished from the interventionist ‘handouts’ that conservatives love to hate.

While I share Sachs’ sentiment that unequal access to educational opportunities in America is a burden on our economy and an ugly contradiction to our meritocratic ideals, I think that the road towards greater equality and prosperity will demand more than simple investments in educational infrastructure.  If indeed it is true that manufacturers in America are crying out for more skilled workers, I would ask how we can get those firms involved in the process of creating the educated workforce that they seek.