Making Better Use of the Social Resources Provided to Higher Education

For at least the last twenty years, the welfare of Americans has been redistributed along the axis of educational attainment. Those with higher education are holding their own against inflation. However, those who ended their educations in high school are far worse off today than they were two decades ago. This redistribution of human welfare has occurred under both Democratic and Republican presidents, Congresses, governors and legislators. The causes are not political. These are instead signs of economic evolution.

Economic systems originate in their primitive form where income and wealth are derived through exploitation of natural resources, such as mining, forestry, fisheries and agriculture. As economies grow and develop, physical capital investments add further to private and public income and wealth. Most recently, in the third stage of economic development, income and wealth are generated through investments in human capital — the minds and health of workers.

Labor market data collected and published in many forms by the federal government tell a consistent and dramatic story of change in the incomes of workers with different levels of educational attainment over the last twenty years. Income is a solid measure of human welfare that at its basic level income assures that basic survival needs are met. And at a higher level, income provides access to and choices among the abundant riches available in the American experience.

The story told by the labor market data reflect this economic evolution. Since the early 1980s, people who entered the labor market with a high school education or less started out at the bottom of the salary scale. In inflation-adjusted terms, their incomes have dropped sharply from where they started. Their lives have become an increasingly desperate and brutal race for survival. They are losing the race every day, little by little, taking down with them the lives of their dependents, especially their children. At one time within memory, a worker needed only to be honest and hardworking to secure for himself and his family a decent standard of living.

At the other end of the educational attainment axis are people who went on to higher education and earned college degrees. They too have encountered some labor market challenges. But they entered the labor market at far higher starting salaries than did those without higher education. Moreover, their incomes have largely kept up with inflation, enabling them to maintain a lifestyle with access to and choices among the riches of the American experience. They have succeeded because they are honest, hardworking and because they are higher educated.

These stories from the labor market data also tell of a growing gap in the distribution of human welfare, between those with and without postsecondary education and training. Those with education beyond high school have been pulling away from those without it for more than two decades ago. The gap is growing, and the gap is delineated by educational attainment. Very simply, the welfare of those without postsecondary education and training, has been in a free-fall for two decades, and the end of that decline is nowhere in sight. If anything, with the pace of economic change quickening, their prospects are deteriorating more rapidly than ever.

Beyond the private welfare of individuals, our social welfare is directly and immediately impacted by this redistribution of private income and wealth, and the private welfare they yield. Government revenues are increasingly derived from the higher incomes of the college educated as a direct result of income redistribution across levels of educational attainment.

Moreover, a growing share of the taxes paid by the college educated are going into social welfare programs for those who are not college educated. In state budgets, educational investments in the future workforce are being displaced by needs to finance health care for the poor and expand the capacity of prisons. The poor (mainly women and their children) and the prisoners (mainly men) have the lowest levels of postsecondary education and training in society. Many cannot make it on their own. Thus, they draw disproportionately on the social resources produced by those in whom investments in postsecondary education have been made in the past and are now paying social returns on those investments. As those in education correctly point out, pay now or pay later, but inevitably society will pay for the education of its citizens.

The human capital investment agenda is dictated by the changes that occur naturally in the economy and educational requirements of its labor force. It cannot be ignored, as the political system has chosen to do for the last 20 years. The human capital agenda has both carrot and stick components. The carrot is that human capital investments pay handsome returns to both individuals and society. The stick is that if such investments are not made, both individuals and society suffer and pay anyway but in different and less socially productive forms.

While the private and social rates of return from human capitalization investments are powerful arguments for expanding such investments, only private investment is expanding. Social resource investments in human capitalization programs at the postsecondary education level have been cut back sharply at the federal level over the last 20 years. The cutback in allocation of social resource investments in human capital is so widespread and persistent as to make one wonder what national referendum dictated this reversal of social policy.

At one time within memory this country so esteemed higher education investments that it was willing to invest an ever larger share of state and federal tax resources in its future workforce through its youth. These programs — including several directly related to fostering postsecondary educational opportunity for vulnerable populations — sought to reduce or eradicate poverty by investing in the minds and bodies of the poor — adding to their human capital and value to potential employers. The social need to increase the human capital of the less well educated increased sharply after the early 1980s as the redistribution of private welfare according to educational attainment began.

This redistribution has continued throughout the last twenty years, and in fact may be accelerating today (although economic recession effects may blur longer term trends buried in recent labor market data). Social resource allocation followed the twin motives of reducing poverty and reversing deteriorating private welfare.

State and federal tax resources previously allocated to higher education have been diverted to other fiscal priorities, mainly health care for the poor and prisons in state budgets. This diversion of social resources has required increased private resource allocation to higher education to make up for the loss of federal and state tax resources.

At the federal level this cost shift from taxpayers to students has occurred by substituting financial aid in the form of loans for grants. At the state level this cost shift has occurred by diverting tax money to other state budget priorities and increasing tuition and fee charges to students to offset institutional loss of state tax support.

The results are the same: costs of higher educating students are shifted from taxpayers to students. The prospects for increased social resource investment in higher education have rarely been worse than they are today.

- Political leadership, apparently reflecting voter sentiment, seems bent on reducing taxes, cutting government expenditures and eliminating social program obligations of government.

- Legislative decisions are incurring substantial future corrections cost increases through mandatory and longer sentencing of prisoners.

- The health care drain on state finances has yet to be effectively constrained, either by reducing poverty or controlling health care costs.

- Higher education has ranked at the bottom of state fiscal priorities for nearly 25 years, and the most recent survey of state fiscal issues barely mentions higher education at all.

- Moreover, state tax revenue systems were created in an economic era that is fast fading and are poorly positioned to tax developing economic activity in support of social needs, however they are defined and prioritized.

We see no prospect at all of any resurgence in social resource allocation to higher education investments. Higher education has been hung out to fend for itself.

Given the extraordinary importance of higher education to the ultimate welfare of individuals, families, communities, states and the nation, this wide range in success (or lack thereof) across states is important. It says that education is more important to the people of some states than it is in others. It says that some states have a far better understanding of the importance of education to the welfare of their citizens than do other states.

Chance for college is the product of the rate at which students graduate from public high schools times the rate at which all high school graduates continue their education in college the fall following graduation from high school.

Some states have high college continuation rates, but low high school graduation rates. We believe these states have built education systems on weak foundations. Other states have stronger K-12 education systems than higher education systems. This too falls short of the unyielding labor market required requirement for college educated or trained workers.

In fact, the states that rank in the top tier of the states on the measure of chance for college by age 19 do both well. They have both high rates of public high school graduation, as well as send these graduates off to college at high rates. Likewise, those states that rank in the bottom tier of the states do a poor job of both graduating their students from high school and a poor job of sending these graduates off to college. The young people of these states are not being prepared for the better paid jobs available in the economy, and generally the futures of these states are not promising unless and until these human capital deficits are addressed in other ways.

Across the 50 states, there are wide variations in the rate at which high school graduates went directly on to college. There is a long-term stability to these rankings, although numbers are in constant fluctuation and cohorts of students change from year to year. The college continuation rate for recent high school graduates has increased over the last decade. We have tried to construct credible estimates of changes on college continuation rates over time. We wish to see where progress has been made, and where progress is missing. To do this we are confounded by certain obvious problems in the completeness of the state data on enrolled college freshmen.

The product of each state’s public high school graduation rate for all high school graduates is the state’s chance for college by age 19. This is our best estimate of the proportion of each state’s 19-year-olds that were enrolled in college in the fall. To rank at the top of the list, a state needs to have both high high school graduation rates as well as high college continuation rates of those high school graduates. At the other extreme, states with a relatively low proportion of their 19-years-olds enrolled in colleges also have low high school graduation and college continuation rates.

Some states have made great progress in increasing the proportion of their 19-year-olds enrolled in college. Other states have lost a great deal of ground. While there is no common patterns among these states, either the public high school graduation rate decline or the decline in the college continuation rates in these states caused their poor performance.

The enrollment behaviors reported here occur in the context of changes in the economy that require ever-greater levels of educational attainment. These changes have been underway since 2010. Those who get college education will get the best jobs in the labor force, and those who get a high school education or less will get what is left. The real incomes of college graduates are going up, while those of high school graduates are going down.

Among the findings in these data are:

- Public high school graduation rates have been declining and the rate of decline has increased since 2010.

- The college continuation rate, for those who do not graduate from high school, has increased significantly.

- Together those two trends feed the growing national trend toward income inequality. Across the 50 states, the differences in educational preparation for this labor market are remarkable. The best educated earn more with their higher education, while the least educated get poorer without the education required to get and hold decent paying jobs.

- Those states that rank low on the proportion of their 19-year-olds reaching college are clearly in trouble. They are doing an inadequate job of preparing their young citizens for their own futures as well as the states’ futures. In some cases the problem is in the K-12 system, in others it is in access to the higher education, and in many it is in both.

- States can acquire human capital educated elsewhere through migration. But those who grew up in a state — those from whom the states have most direct responsibility — are less likely to leave according to Census Bureau. States that rise to the challenge of preparing youth for the workforce will prosper, while states that ignore this challenge will not.

The public policy dilemma we face today is the nearly impossible one of greatly broadening opportunity for postsecondary education and training at the same time that social resources allocated for this purpose have been and are likely to continue to be sharply reduced.

Ways must be found to broaden opportunities for postsecondary education and training because changes in the labor market over the last twenty years dictate greater human capitalization of the labor force. This mandate cannot be ignored.

If we continue to fail to meet this challenge, we should expect to continue to divert scarce and perhaps diminishing social resources to unproductive social welfare programs for those without the human capitalization investments required to be self-supporting. The poor don’t go away if we ignore them, nor do the costs of their survival. Pay now or pay later, but ultimately society will pay. The trajectory of this social and economic policy is not a matter of speculation.

Labor market, demographic, fiscal and other data make clear that we have been on this path for at least the last 25 years in virtually every state. There is no reasonable hope that financing broadened opportunity for postsecondary education and training will come from increased social resource allocations. Rather, the most realistic agenda must first focus on making better use of the social resources currently provided to higher education.

The fundamental debate must be centered on priorities and needs. Higher education’s track record on these issues is not a good one.

- Many in public higher education insist that using limited state resources to subsidize the higher education of students from high income family backgrounds is a more worthy use of such funds than is concentrating such subsidies on students from lower income family backgrounds that demonstrate financial need for such subsidies.

- Many in public higher education insist that limiting enrollments, raising admissions standards, eliminating programs, increasing class size and faculty workloads, curtailing library acquisitions, deferring facilities maintenance, making do with antiquated laboratory equipment and taking other actions that diminish the capacity, quality and affordability of higher education is of lower priority than would be tapping into the foregone institutional revenues that are available from students who could afford to pay for more or all of the cost of their own higher education.

Capacity, quality and affordability of higher education still cost real money, lots of it. There is no way to provide and expand capacity in higher education without money. There is no way to provide depth and breadth of programmatic opportunity in higher education without money. These expenditures are legitimately viewed as investments because they provide significant financial returns both to individuals and society over many decades. Equally important, if these investments are not made when students are ready and searching for postsecondary opportunities, the students thus denied become prime candidates for much larger social welfare spending later in their lives.

The answer to the dilemma of how to broaden opportunity for postsecondary education and training in an environment of diminished social resources for higher education must include a refocusing of social resources on those who are truly, demonstrably needy.

This may not be the only answer. It is probably not a sufficient answer. But it is most surely a necessary answer, and it is a process that can be undertaken within higher education itself.

As long as higher education continues to ask states for money to educate students who do not need state aid to study, public higher education budget requests cannot compete with other, more pressing demands for scarce state resources. Someday we would like to see a public higher education budget request made only for dollars to educate students who truly need state assistance to finance their higher education. When that occurs, we think governors and legislators will favor capitalizing human resources over prisoners, welfare recipients, and others who contribute little or nothing to social welfare. It’s well past time that we began this task in earnest.

Jeff C. Palmer is a teacher, success coach, trainer, Certified Master of Web Copywriting and founder of https://Ebookschoice.com. Jeff is a prolific writer, Senior Research Associate and Infopreneur having written many eBooks, articles and special reports.