The Cato Institute’s Mark Tanner posted comments recently about an alternative policy approach for combating poverty. He said that:
“It would make sense therefore to shift our anti-poverty efforts from government programs that simply provide money or goods and services to those who are living in poverty, to efforts to create the conditions and incentives that will make it easier for people to escape poverty.
And what would such a policy look like? We actually have a pretty solid idea of the keys to getting out of and/or staying out of poverty: (1) finish school; (2) do not get pregnant outside marriage; and (3) get a job, any job, and stick with it.
An effective War on Poverty, therefore, would reform our failed government school system to encourage competition and choice. High school dropouts are roughly three and a half times more likely to end up in poverty than those who complete at least a high school education, while few college graduates are poor for any extended period of time.”
Overall I agree with his assessment. Finishing school provides access to human capital which provides the bare minimum for avoiding poverty or getting out of it should we hit the rough patch. Mark Zandi, chief economist at Moody’s Analytics, during an appearance earlier this morning on CSPAN also pointed out that there will be global demand for jobs in higher income paying fields such as legal services, accounting services, management consulting, and economic consulting. This adds to Mr. Tanner’s “finish school” prescription. Higher paying jobs will call for specialized skills and skills training provided at a college or university.
Government bottlenecks access to human capital provided via public colleges and universities by assessing a non-market based tuition on students, and that annual tuition assessment is not cheap. According to The College Board, the average annual tuition for a two-year public college is $3,131. The annual in-state amount for a four-year public college is $8,655 and for out-of-state students that rate comes up to $21,706. A private four-year school will cost you $29,056.
Mind you, this is just tuition. Don’t forget books, activity fees, and room and board.
The hit students are taking on student loans is well documented. Having to pay back tens or even hundreds of thousands of dollars in student loans while facing a dysfunctional labor market is stressful. The fear of being in a loan payback predicament may also divert potential students away from matriculating to college and university and deny the economy of valuable, well trained human resources.
If we want to ensure a supply of well trained workers and entrepreneurs for high paying jobs, we should reduce the cost students incur for getting an education by making attendance to public colleges and universities tuition free. The cost of tuition should be picked up by state and federal budgets, research revenues collected by universities and colleges, and other contributions by the private sector, to which a significant amount of the benefit of an educated student will flow to.
According to the U.S Department of Education, approximately 21 million students were enrolled in a degree-granting institution in 2010. If we applied the amount of tuition paid by students attending four-year private institutions, the annual amount of the educational tab that governments and business would pick up is approximately $610 billion. This amounts to approximately 21% of the total local, state, and federal contribution to gross domestic product and approximately four percent of the nation’s overall GDP. Policies that close our $420 billion trade deficit would significantly contribute to lowering the overall cost of publicly funding college education while also increasing employment.
The United States, in order to implement this policy, would have to ask itself if investing four percent of its economy into higher education is worth the returns that include an increasingly skilled labor force, higher wages, and increased consumer consumption.