The Value of Education in a Recession

The Wall Street Journal:

The recession has led to steep job losses across the U.S. work force, but less-educated people have been hit particularly hard.

The unemployment rate for workers over 25 years old who haven't gone beyond high school rose to 10% in May, nearly doubling from 5.2% a year earlier, the government said Friday. Among workers who haven't completed high school, the unemployment rate rose to 15.5%, compared with 8.4% last year.

By contrast, the jobless rate among those with four-year college degrees was 4.8%, up considerably from 2.3% a year ago, but well below the rate for people with less education.

Here are more thoughts:

College graduates have definitely been hurt by the current recession. Thousands find themselves out of work, and many of those newly unemployed will struggle to find a job that paid as well as their last one. Still, on a relative basis, a college education has never been more valuable.

The pay gap between college graduates and everyone else, for instance, reached a record high last year. Four-year-college graduates made 54 percent more, on average, than people who attended college but did not graduate. Fifty-four percent!

If you’re a college student trying to decide whether to get your degree, I would urge you to remember that number — rather than anecdotes about unemployed college graduates.

What I'd love to see is a breakdown of how unemployment correlates to whether or not a degree was earned from a college that was accredited, some indication of the ranking or reputation of the school attended, and how unemployment varies depending on what major was studied.

While I often caution about taking on too much debt to go to college, if you can get into a good school and choose your major wisely (balancing your interests, your expenses, and expected future income), college can be a valuable investment and may apparently help as a form of insurance against unemployment.

Choose your school and major with caution, however. Not all schools are created equal and neither are all majors. If you're not careful, rather than being a good investment, higher education can also turn out to be a financial disaster.