I’ve written a series of blog posts arguing that real earnings of young college grads have been falling since 2000, not just in inflation-adjusted dollars, but also relative to less educated peers. (for example, see “Earnings of Young College Grads vs College Costs” and “Yet More on Young College Grads”).
Now let me give the positive case in favor of more schooling. There’s a new paper which argues that the “nonpecuniary” benefits of schooling are at least as large as the monetary benefits, and perhaps larger. Phillip Oreopoulos of the University of Toronto and Kjell Salvanes of the Norwegian School of Economics and Business argue that
Experiences and skills acquired in school reverberate throughout life, not just through higher earnings. Schooling also affects the degree one enjoys work and the likelihood of being unemployed. It leads individuals to make better decisions about health, marriage, and parenting. It also improves patience, making individuals more goal-oriented and less likely to engage in risky behavior. Schooling improves trust and social interaction, and may offer substantial consumption value to some students. We discuss various mechanisms to explain how these relationships may occur independent of wealth effects, and present evidence that non-pecuniary returns to schooling are at least as large as pecuniary ones
Oreopoulos and Salvanes go on to make a back-of-the-envelope calculation of the size of the nonpecuniary effects. They suggest that
about three quarters of the schooling effect on selfreported life satisfaction is due to non?pecuniary factors. A 12 percent increase in annual earnings would then imply that the total non?pecuniary gains are equivalently worth another 16 percent increase in earnings (for a total of 28 percent).
The implication: College may still be a worthwhile investment, despite the erosion in the monetary returns from college since 2000.