Productivity isn’t the metric that determines whether the government recoups student loan defaults, income is. And the income of graduates is still multiples that of non-graduates, as shown by the data in this article.
Individually, yes. But that doesn’t mean that people are making more money in the aggregate by more people going to college. If the government subsidizes college and that results in more people going to college, but employers just respond by taking previously non-college jobs and making them require college degrees, there isn’t actually more money in the economy as a result to justify the government expenditure.
You’re moving your own goal post. You complained about the government’s relatively small outputs from the student loan program, which is absolutely recouped many times over by today’s income premium, in the form of income taxes, regardless of whether the economy grows.
Your hypothetical isn’t the way things are actually playing out, so I don’t feel like it needs to be argued. Degree holders are generating value on average, so the economy does, in fact, have more money as a result of education. And the government also makes money on it’s investment in education on top of that.
I feel like you're talking past a lot of the other commenters in this thread. I'll try to frame it another way:
Generating value is synonymous with growing the economy and being more productive. You can't inflate incomes without either increasing productivity or printing money. If degree holders command higher incomes without offering higher productivity, it comes at the expense of non-degree holders earning lower wages than they would have without the degree holders around.
In my opinion, much of the income premium comes from employers using degrees as a filter (similar to a standardized test). Doing well on the SAT doesn't make you more productive, but does give you a leg up over your peers.
I totally agree that a big factor in income differences is due to cultural biases that favor degree holders. I don’t think degrees are economically zero value though, for example patents are primarily held by inventors with postgraduate degrees, and more businesses are started by degree holders.
I’m not really sure how to answer your first part, I’m not trying to talk past anyone, but I feel like people are responding to my point that the income premium is what matters to the student loan program by repeating the conclusion of the paper that the wealth premium is going to zero.
The income premium and the wealth premium in this paper are two different things, and even though people with degrees might end up having net zero additional wealth accumulation at the end of their lives, that doesn’t mean the student loan program is also net zero, or that people with and without degrees have the same lifestyle.
The student loan program gets to make it’s money back before degree holders get to save the money, so the income premium matters to the government more than the wealth premium, when figuring out whether forgiving loans is worth it or not.
Right, so the issue with the income premium without economic growth argument is that the government would have collected those incomes anyway, just from different people (unless the student loans are structured as a % of future earnings, in which case I apologize for my ignorance).
Of course, degrees aren't zero value, but the subsidies for education (student loans) could still be distorting supply in a way that results in a net loss for the government. For example, a self-taught engineer or entrepreneur spends years in school instead of inventing or starting businesses. This is a poor allocation of investment and human capital which results in a net economic loss (including a loss for the government).
Why do you believe that school years take away from invention and business? There’s no evidence of that, and a lot of evidence in the other direction. Right now, both inventing and starting businesses are strongly correlated with degrees. The evidence we have suggests not only that student loans are a very good investment, it suggests the investment is so good that the government would make almost as much money back if they subsidized education completely, if they paid for education and didn’t ask for the money back. The evidence in countries like Norway and Finland seems to back this up as well. They subsidize education, and their economies are strong, and their education systems out-rank the US globally.
So, if in the aggregate a higher percentage of people have degrees in recent decades (true), but the productivity growth per employee hasn't gone up (also true), then the economy as a whole hasn't benefited (economically, anyway) from having more people go to college.
The example of patents looks a lot more like "people with advanced degrees are more likely to be in jobs where filing for patents is encouraged by the employer" than it does like "people with advanced degrees invent more". To be honest, the fact that our current patent situation is so obviously a net negative might be skewing my judgement on this, but if you thought that bringing up patents was a way to make it sound convincing that college degrees enhance productivity, well it doesn't for me anyway. I even have a patent, or my employer got one from my work anyway, and I still think our patent system is value-destructive.
I feel like the point I’m trying to make is being repeatedly ignored in favor of the thing you want to talk about. I have not been arguing that college benefits the economy as a whole. It doesn’t take benefitting the economy as a whole for the government to make back it’s money on student loans, specifically because the government gets the first cut of the income, even before the student does. Is it clear at this point that the current income premium and the wealth premium are separate things, and that the wealth premium is the only one currently disappearing?
Maybe the government part is confusing here. Imagine student loans coming strictly from for-profit banks. It is possible for the banks to make their money back, while students lose money, right? This happens to restaurant owners and poor families all the time. It doesn’t matter if the loans stimulate the economy, or if a percentage of loans default, the bank still makes it’s money.
Anyway, I’ll play along with the other arguments, just for fun. So by what metric are you declaring that productivity is not growing per employee? The US per-capita GDP has been growing steadily. How do you back up your claim that productivity hasn’t gone up?
Even if it were true, I don’t think it’s clear or true that you can declare the economy as not having benefitted from education in the past. The paper we’re commenting on has data that shows a net positive economic value in the past, even though the wealth premium is disappearing. And BTW do you really believe that - that the education system has done zero economically? Is that what you’re implying?
People with advanced degrees do invent more, in part because people with advanced degrees are more likely to be in jobs where invention and patents are encouraged, yes. Also because people who are prone to inventing are more likely to choose to do a PhD. How does this demonstrate that people would be inventing more if they chose not to go to college? People can already choose not to go to college, and choose to invent, and by and large that is not happening - what’s really stopping all the non-degree holders from inventing right now? You’re saying it’s just jobs keeping inventors out? There’s no education requirement on submitting a patent, so if college does nothing, why aren’t high school graduates already the majority of applications?
Correlation does not equal causation. There's a very broad spectrum of people who do not have degrees. It's very likely that if you took those same people earning degrees and had them enter the workforce instead, they'd have equal or greater pay.
That data doesn't reference the point I'm making. What I'm saying is that it's very possible that if the same people that got bachelor degrees instead entered the workplace, they'd have equal or greater lifetime earnings.
To put it another way, earnings are correlated with an individual's talent and drive. Currently, many of those people end up getting degrees. It's a correlation, it's not the degrees that are causing the jump in earnings, it's the individual's skills.
You’re right, figure 3 doesn’t answer your question. But your point/topic is not addressing my original point. My point above was that income before taxes alone is what you need to evaluate whether the student loan program offsets the student loan default rate. The financial return on investment of the student loan program is determined solely by the increase in income, not the wealth premium.
However, your conclusion isn’t shared by the authors. They show a positive return on college degrees, it’s just smaller than the unadjusted difference in income.
One probable factor for this is cultural bias toward giving jobs to people with degrees, and paying employees more who have degrees. Individual skills alone do not explain the difference in earnings, so despite the fact that talent correllates with income, the correlation is not 1, and thus it is not likely that the same people earn equal or greater without a degree than with. It is likely that the same person without a degree will earn less than with a degree, on average.
That doesn't say anything about which is cause and which is effect, which is what is relevant for an increase in college education to make a more productive workforce.
In fact, the labor productivity growth rate does not seem to have significantly changed at all, even as the percentage which is college educated has gone up a lot: https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH
Again, I wasn’t talking about productivity, that is orthogonal to my point. I was talking about the income taxes that the government extracts from the workforce, and the income taxes the government gets are higher on average from college grads. Productivity is subjective, and while it matters indirectly to whether the economy is growing, it has no direct bearing on whether the government recoups it’s investment in student loans after losses from defaults. Income taxes directly offset those losses. Productivity... who knows, it depends heavily on your agenda and point of view.
To address your point directly, I don’t personally believe that non-grad programmers are as economically productive as grads on average. I would totally believe that non-grads are as productive at building UI widgets and CRUD apps and stuff like that. However, inventions and patents are absolutely dominated by people with postgraduate degrees. It’s not a matter of hourly output, it’s a matter of yearly compound interest, and the compound interest in computer programming is generated by research. It is overwhelmingly PhDs who are developing neural networks and AI methods right now, overwhelmingly postgraduates who are the architects of new hardware and of new software methods. These are the things making the computer industry grow larger in fundamental ways.
Having done my master's degree in neural networks in the 90's, I reluctantly have to admit that they are not all that productive in the great majority of cases where they are used (although there are exceptions). The reality is that the vast majority of what AI or neural networks are used on, is buzzword bingo.
