Why There is No College Bubble

Finally someone tells these college bubble heads to put up or shut up: I’d like to take this opportunity to triple-dog-dare Peter Thiel

For years, the left has insisted that college, like the stock market and housing, is a giant bubble that is on the verge of popping. Like many predictions of doom and collapse, the left’s track record on these matters is awful as evidenced by this Google search of failed predictions from 2005-2007 of a ‘college bubble’. This is no different than the leftist hysteria over global warming; when the said warming fails to materialize, they shift the date to the right. Going by 1970′s predictions, NYC should already be flooded; so much for that. These gloomers fail to understand or ignore the economics that are driving higher prices, such as the surging post-2008 college wage premium. From the New York Times:

The Pew report found that the wage premium for having a college degree was at a record high. The median annual wage for young college-educated workers now is $45,500, compared to $28,000 for high school graduates — a gap of $17,500. In 1965, the gap was much smaller: $7,400. (All the figures are in 2012 dollars.)

This is not surprising. In the hyper-competitive post-2008 economy, for virtually all industries the supply of labor vastly exceeds demand, especially as shown by the record low labor force participation rate. This gives employers the luxury of being very selective when hiring, by only hiring the best and the brightest from a huge applicant pool – even for very mundane jobs. You need to have the credentials that 40 years ago would have gotten you a job at NASA just to file paperwork or wait tables. The premium for prestigious schools in STEM majors is even greater. I agree with the washingtonpost.com article that there will be no bursting of any alleged ‘bubble’ and prices will just keep rising.

Instead of looking at the facts, the left is blind by pure irrational loathing of the ‘elite’ and a fear of rich people. Thee left wishes college were a bubble so that the college wage premium vanishes and college educated people see their wages shrink. In the left’s war on success and free markets, they want employers to resume hiring less-competent employees instead of only screening for the best and the brightest. This would hurt profits, and ultimately the US economy and stock market.

Whenever you have some lib calling something a bubble (stocks, housing, college) or saying something is a crisis (wealth inequality, unemployment, global warming, police brutality), you can be sure they will be wrong, just like they have been wrong so many times in the past.

But on the other hand, there are liberals who insist everyone should go to college. We argue that while college does have many benefits such as higher wages, and having a degree does signal competence to employers, it’s only suitable for those who are smart enough to get good marks and major in a high-paying field. The best solution would be to replace credentialism with IQ-type tests. That’s the whole reasoning behind the SAT, originally championed by classical liberals as a way to create opportunities for lower/middle income students, and now the left wants to do away with it because apparently the wrong students are scoring high.

Comments are closed.