College Grads Seek Return on Education Investment
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What is the main topic discussed in this episode?
Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. A college degree used to mean a ticket to a high-paying job. Well, nowadays, graduates are getting a much smaller return on their investment. In a moment, we'll examine how we got to that point. First, some money and market news you should know. In a series of features on women in the economy, the Journal's Heard on the Street team says investors should pay attention to the fact that three-quarters of women aged 25 to 54 are in the workplace. That compares with just half in 1970.
What is the episode's overview of declining returns on college degrees?
And women's spending power has also risen, as women working full-time now earn 80 cents on the dollar to men versus 59 cents in 1970. Still not pay parity, but an improvement. Data from the Labor Department shows that single women allocate more of their budget toward health care, groceries, apparel, and housing than single men with comparable budgets, while men spend more on cars and alcohol, among other items. But women's attitudes toward money is just as significant. A recent Bank of America Merrill Lynch survey showed that 41% of women said they would use disposable income to pay down debt versus 36% of men, and just 14% of women said they would use the money to buy more things versus 19% of men.
And that conservatism extends toward women's investing behavior, and Hurt on the Street says it may affect the companies in which they invest, leading companies to put more women into positions of power. Recent research suggests that companies with female CEOs are less likely to misreport results and that companies with female directors encourage their CEOs to take on fewer risks.
There was a time when getting a college degree was a sure thing in terms of helping people secure jobs and higher salaries. But now more and more college graduates aren't realizing a healthy return on their investment. Let's bring in Wall Street Journal reporter Josh Mitchell on the line to find out why. So, Josh, in your story, you boil this down to three reasons behind the change and return on higher education investment.
The first thing is that the cost of college has risen pretty dramatically in recent years. Just to give you a sense of how quickly, if you look at the Consumer Price Index, which is one of the main inflation measures that the Federal Reserve looks at, college costs or the amount of money that families are paying to go to college has risen at triple the rate of inflation since about 2008. So college costs are rising very quickly, or at least they have been over the past 20 years.
How has women's increasing workforce participation and spending power been highlighted?
The second thing is that while college graduates still make a lot more than non-graduates, their real wages, their inflation-adjusted wages, have been pretty flat since about 2000. The third thing, which is related to the first two things, is that the wealth premium, the amount of wealth that college graduates are building compared to non-graduates has gone down, at least for recent cohorts of college graduates. So if you take a look, for example, at people born in the 1980s who graduated college, you They still have more wealth than those who did not graduate college. But if you compare them to people who were born in the 50s and 60s who went to college, that wealth premium has gone down. And so these are several shifts that are causing economists to really look at this question of what is the return of college?
If you go to college, what can you expect to gain in terms of income and wealth afterward?
You mentioned the wealth premium sort of leveled off around 2001. What was behind that?
This is definitely a big point of debate among economists. There's some recent research that suggests there's just been this shift in the economy that's tied to technology. There was the tech boom in the late 90s that, you know, caused more demand for workers with so-called cognitive skills to operate new technology. And when that tech bubble burst, the economy and employers no longer needed as many workers with those cognitive skills. This is a theory, and there's research to back up this theory behind why this happened.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:38
2
What is the episode's overview of declining returns on college degrees?
0:38–2:50
3
How has women's increasing workforce participation and spending power been highlighted?
2:50–7:39
4
What did recent data and surveys reveal about women's financial behavior and investing?
7:39–9:05
Speakers
2 identifiedMore from WSJ Your Money Briefing
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