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As a greater share of the U.S. population has earned a college degree over time, one might expect the value of a degree to have fallen sharply. However, the supply of educated and skilled labor has been matched by a rising demand. As a result, the best estimates indicate that the returns to education remain high. This result is consistent across a variety of econometric studies, including those that focus on improving completion rates. Yet despite these returns, only one-third of twenty-five-year-olds had a bachelor’s degree or higher in 2016.
There are a variety of policy levers to raise college attainment, but increasing completion rates represents an important area for improvement. Many students who pursue a degree do not graduate. Only 61 percent of first-time students at four-year universities finish their degrees within 200 percent of the usual time to completion. Only 21 percent complete associate’s degrees within four years. While the particular policies that are best suited to increasing attainment are beyond the scope of this report, they would likely include a mix of higher completion rates at some colleges combined with an increase in the number of students who elect to attend colleges that already have higher completion rates.
The significant returns to education mean that if the costs of increasing completion can be kept in check, the benefits are likely to exceed the costs in the long run. At an individual level, David Autor estimates that after accounting for the effects on higher wages and the costs of a degree, the net lifetime gain from college for a man is currently $590,000 and for a woman $390,000.19 However, the gains from education accrue over a lifetime of working. Initially, increasing college completion leads to higher fiscal spending and lower employment. For this reason, the fiscal costs of improving the college attainment rate of the population will exceed the fiscal benefits for the first decade under the most plausible assumptions.
These projections are not without significant risks and caveats. First, the analysis assumes a modest cost of college for targeted students as well as a modest growth in the cost of college. The costs and methods for inducing many additional students to complete their higher education are unknown. Success could necessitate significantly higher costs and could prove more difficult than the modest assumptions used in this analysis. Therefore, the costs of implementing such a program could outweigh the benefits derived in this study. Alternatively, the costs could be lower than assumed and therefore the net benefits would be greater. A careful analysis of these costs is beyond the scope of this research, and the cost estimates included illustrate the net benefits that could accrue if such costs could be achieved rather than a projection of the actual costs.
In addition, while marginal students gain from college completion, as an increasing share attend and earn degrees, college preparedness could become an issue that risks undermining the returns to higher education.
Finally, the wide variation in completion rates at colleges is likely matched by a wide variation in the returns to education that they provide students. This suggests that not only educational attainment should be improved but educational quality as well. Without more attention to educational costs and quality, a positive net economic impact is not guaranteed.
It is also worth noting that there are benefits to increased educational attainment that are not captured in this model. For example, Enrico Moretti finds significant economic spillovers in the local economy from a more-educated workforce: A 1 percent increase in the share of college-educated workers in a city increases the wages of low-skilled workers.20 In addition, some share of the higher educational attainment would likely include science, technology, engineering, and mathematics workers, which Giovanni Peri, Kevin Shih, and Chad Sparber find are an important driver of productivity growth in U.S. cities.21 Positive effects on other outcomes such as health, crime, and quality of life are also ignored.
Higher education remains a potential path to a stronger economy, higher incomes, and even net fiscal growth. Improving college completion rates is one plausible way to increase attainment. Future research should investigate which policies are most likely to achieve this, and more precisely estimate the likely costs of doing so.
19. David H. Autor, “Skills, Education, and the Rise of Earnings Inequality Among the ‘Other 99 Percent,’” Science 344 (2014): 843–851.
20. Moretti, “Social Returns to Education and Human Capital Externalities.”
21. Giovanni Peri, Kevin Shih, and Chad Sparber, “STEM Workers, H-1B Visas, and Productivity in U.S. Cities,” Journal of Labor Economics 33 (S1) (2015): S225–S255.