Unveiling an ambitious new plan to boost college affordability, President Obama recently called higher education an “economic imperative” and the “surest path to the middle class.” His proposal involves creating a new government rating system that would evaluate colleges and universities on affordability and performance measures and even help determine how federal financial aid is allocated. The President made the case for action by comparing soaring tuition costs to far more modest income growth over the past three decades. During this time period, tuition costs have increased by more than 250 percent, while the typical family’s income has grown only 16 percent. Noting that many states have been cutting their higher education budgets in recent years, the President said that students and their families have been forced to shoulder an increased share of college costs, resulting in much higher levels of student debt. The average student who borrows to pay for college now graduates owing more than $26,000, a burden that restricts job choices and makes it more difficult to start a family or establish a business.
The issue of college accessibility is a critical concern for students and families and is also directly linked to economic growth. A new study by the Economic Policy Institute (EPI) demonstrates the importance of a well-educated workforce to a state’s overall prosperity and also how short-sighted the decisions made by many states, including California, to cut funding for higher education in recent years have been. The vast majority of states with higher wages are states with a well-educated workforce. Moreover, the report finds little evidence that states without well-educated workforces are able to successfully create high-wage economies. This seems intuitive, but was not always the case. EPI’s study finds that this link has gotten noticeably stronger in recent decades. In the late 1970s the average wage difference between a worker holding a bachelor’s degree and a high school graduate was much smaller than it is today. Over the past three-plus decades, the gap has grown significantly, making a well-educated workforce even more important to economic productivity and broadly shared prosperity within a given state. In 2011 the average annual wage of a US worker with a bachelor’s degree was more than $20,000 higher than that for a high school graduate. In fact, the EPI report asserts the link is so strong that:
…providing expanded access to high quality education and related supports — particularly for those young people who today lack such access — will not only expand economic opportunity for those individuals, but will also likely do more to strengthen the overall state economy than anything else a state government can do.
California clearly has its work cut out, as nearly 60 percent of low-income working families have no education beyond high school, the largest share of any state. Consistent with EPI’s report, only Californians with bachelor’s degrees made strong wage gains over the past generation. We’ve recently blogged about the link between access to higher education and broadly shared prosperity, as a college degree is strongly tied to economic security and mobility — providing pathways to opportunity for the state’s more than 1.3 million low-income working families.
An upcoming CBP report will examine funding levels for California’s public four-year degree university systems, the University of California and the California State University, and will highlight the need for increased state reinvestment in higher education. Stay tuned.
— Phaelen Parker