Discover Quality Change of U.S Postsecondary Institutions from 1990 to 2010 (Intro)

      College undergraduate education in US has become more and more popular among people. Between 1990 and 2011, total fall enrollment in degree-granting institutions increased 31 percent, from 13.8 million to 18.1 million[1]. Part of the reason why demand for higher education increased is due to an abundance of evidence showing wage premiums for college education. According to the 2012 Current Population Survey, average wage of workers with bachelor’s degree was 49 percent higher than those who only graduated from high schools. Numerous reports show that a college graduate, compared to a peer with only a high school diploma, is more likely to get employed and has higher lifetime income. There are arguments questioning if it is college education that causes the difference. For example, Spence (1973) hypothesized that college degree only functions like a signal, showing graduates’ learning potential. Some other people argue that there is selection bias in terms of college education, namely that different schools attract students of different abilities, and thus wage premium of college education stems from innate difference of graduates rather than college education. However, some previous researches (Card & Krueger 1992, Ashenfelter & Krueger 1994) showed that after taking signal effect and selection bias into consideration, there is still a significant wage premium to attending colleges.

      Even though a wage premium still exists, the costs of attending a college have been skyrocketing in the past two decades. In 2012-13 constant dollars, average undergraduate tuition and fees at a private institution was 21898 dollars in 1990, while in 2013 the charge is 34483 dollars, a 57 percent increase. For public institutions, student charges increased from 8206 dollars to 15022 dollars, an 83 percent increase[2]. In the meantime, mean family income increases the most for top five percent of the families, but only by 42 percent.[3] Such a rapid increase of sticker price has stirred heated discussion whether going to a college remains a wise choice. Vedder (2011) contended that attending college is financially worthwhile only for students who do well academically, but Greenstone and Looney (2012) estimated that on average a college graduate, compared to peer with only high school diploma, is 20 percentage points more likely to get employed than those without the credential.

      However, many of the debates fail to mention that the quality of higher education is changing. For example, if we compare an economics lecture offered in early 1990s and one in 2013, there are many differences: current lectures are offered in a more capacious and air-conditioned room; the instructor can assign materials digitally and communicate with students more easily via emails and cell-phones. In other words, we may be paying more for college, but at the same time we enjoy better goods and services. So to better understand the cost problem of college education, we need to know how quality has changed over time.

      There are four generic reasons why costs of attending a college increase. The first reason is inflation effect, namely that prices of input goods increase over time, and to maintain the same quantity of inputs, colleges have to spend more. Secondly, if schools don’t plan wisely, there will be inefficiency in terms of spending. Another reason is institutions’ intention to increase quality of education. Lastly, since government plays a significant role in American higher education, its change of support might affect institutions’ expenditure decision, and the effect should be more apparent for public institutions.

References:

1.      2013 Digest of Education Statistics, Chapter 3. Annual report by National Center for Education Statistics

2.      Spence, Michael. “Job Market Signaling,” The Quarterly Journal of Economics, Vol. 87, No. 3, August 1973, pp. 355-374

3.      Card, David, and Alan Krueger. “Does School Quality Matter? Returns to education and the characteristics of public schools in the United States,” Journal of Political Economy Vol. 100, No. 1, February 1992, pp. 1-40

4.      Ashenfelter, Orley and Alan Krueger. “Estimates of the Economic Returns of Schooling from a New Sample of Twins,” American Economic Review Vol. 84, No. 5, December 1994, pp. 1157-1173

5.      Vedder, Richard. “Going to College is a Mistake for Many,” US News opinion, November 2011

6.      Looney, Adam and Michael Greenstone. “Regardless of the Cost, College Still Matters,” The Hamilton Project, October 2012

7.      2013 Digest of Education Statistics, chapter 3. Annual report by National Center for Education Statistics

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[1] Data source: 2013 Digest of Education Statistics, Chapter 3: Postsecondary Institutions, Table 303.10. For more general enrollment information, refer to http://nces.ed.gov/programs/digest/2013menu_tables.asp.

[2] Data source: 2013 Digest of Education Statistics, Chapter 3: Postsecondary Institutions, Table 330.10. For more information, refer to http://nces.ed.gov/programs/digest/2013menu_tables.asp.

[3] Data source: U.S. Census Bureau, Historical Household Income, Table F-3, Mean Income Received by Each Fifth and Top 5 Percent of Families (All Races). For more information, refer to https://www.census.gov/hhes/www/income/data/historical/inequality/.