Reynolds’ Law explains why we should not subsidize college for all

“Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.”

…
Glenn Reynolds explains why taxpayer-subsidized college education (and home ownership) for all is not a good use of our money.

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

Megan Mcardle expresses a similar sentiment.

 “it’s all too common for well-meaning middle class people to think that if the poor just had the same stuff we do, they wouldn’t be poor any more (where ‘stuff’ includes anything from a college education to a marriage license to a home). But this is not true. . . . If poor people did the stuff that middle class people do, it’s possible–maybe probable–that they wouldn’t be poor. But this is much harder than it sounds.”

In a previous post I noted that it is not the college degree in and of itself that causes college-educated women to marry at higher rates.

Related articles

• Definition of middle class is muddled (costofcollege.wordpress.com)

Definition of middle class is muddled

Since I constantly hear about how the middle class is being shut out in its ability to afford college, I am intrigued by this discussion of what exactly constitutes ‘middle class’.

Despite the incessant political lip service paid to the middle class, there is no official American government definition of the group. The middle class has been intensively studied but no political consensus exists over how it was created or how to strengthen it

So of course the federal government decided to create a task force to study the middle class.

Within weeks of taking office, the Obama administration’s launched its own effort to help the group. Chaired by Vice President Joe Biden, the “Middle Class Task Force” was launched in January 2009 and includes the secretaries of labor, health and human services, education and commerce.

The government says middle class is about “aspirations”.

The closest the task force came to defining the middle class was a January 2010 report “Middle Class in America.” The study never gives an exact income level that is “middle class.” Instead, echoing academic studies on the subject, the document concludes that “middle class families are defined more by their aspirations than their income.”

Economists use actual income to define middle class.

In academia, various definitions of the middle class are used. Economists generally use income as the determinant. Using census data, they break the American middle class into quintiles — groups of twenty percent — and declare the middle sixty percent of Americans the middle class. As I said in an earlier column, this is the definition I use. Based on 2010 census data, the middle class would be the sixty percent of Americans with household incomes from $28,636 to $79,040 a year.

Sociologists look at how we self-identity.

Other researchers, such as sociologists, have tried to define Americans as middle class by how they self-identify. One of the odd – and I think positive – things about Americans is that they over-identify as middle class. The practice embodies an American ideal that the majority of society’s members, not the few, should benefit.

The rest of us mainly just use our feelings.

Americans themselves give varying definitions of the middle class. In a 2008 Pew survey, one-third of Americans who earned more than $150,000 a year — 11 percent of Americans overall — identified themselves as middle class. In the same survey, 40 percent of Americans who earned less than $20,000 — 25 percent — considered themselves middle class as well. The median family income in the United States was $49,445 in 2010, a lower number than many Americans think.

Why we want to be middle class

But whatever its exact size, the middle class is usually considered more deserving – and more threatened – than those at the extremes.

This helps explain why we label the offering of financial aid to families with incomes up to $200,000, a policy of some Ivy League schools and other elite colleges, as help for the “middle class”.  It feels good to do so, and since the definition is muddled, it’s hard to challenge it.

Here’s a handy calculator from the Wall Street Journal.  What Percent Are You?

Berkeley will offer financial aid to ‘middle-class’ families

The University of California, Berkeley, announced Wednesday that it would offer far more financial aid to middle-class students starting next fall, with families earning up to $140,000 a year expected to contribute no more than 15 percent of their annual income, in what experts described as the most significant such move by a public institution.

While Berkeley has been enrolling low-income and wealthy students at increasing rates,  the relative number of middle-class students has declined.

Copying the Ivies

While several elite private universities — including the Ivy League triumvirate of Harvard, Princeton and Yale — offer similar programs for families with incomes up to $200,000, experts said that Berkeley was the first public university to do so. For the most part, public colleges have focused on merit scholarships to lure top students and aid for the poorest families to ensure access, but many now worry that approach has left out a wide group of families.

Details

Berkeley’s definition of middle-class in creating its new financial aid program is a family with income between $80,000 and $140,000 a year. On top of the parental contribution of 15 percent of income, students would also have to pay about $8,000 per year — generally a combination of loans, work-study and private scholarships. At the bottom end of the spectrum, that would make for a total payment of $20,000, a 37.5 percent discount off the $32,000 total of tuition, room and board for California residents. On the upper end, it would be about $29,000, or a 10 percent discount.

(Out-of-state students, who make up 30 percent of Berkeley’s freshman class this year, will get comparable discounts on the first $32,000 of tuition and fees, but still have to pay an additional $23,000.)

Berkeley’s admission rate is 22%, making it clear this financial aid will be limited to top students.

UPDATE:  A commenter on collegeconfidential pointed out that under this new program a family earning $120,000 would pay $26,000 a year for their child to attend Berkeley, a discount of about 19% from the $32,000 COA.  After looking carefully at these numbers, and taking into account that the median household income in California is about $59,000, I have changed my post title from “Berkeley will offer generous financial aid to middle class families” to “Berkeley will offer financial aid to ‘middle-class’ families“.

‘now cheap foreign genius is easily available’

Thomas Friedman’s “theory of everything” explains the reasons for today’s global turmoil.

The merger of globalization and I.T. is driving huge productivity gains, especially in recessionary times, where employers are finding it easier, cheaper and more necessary than ever to replace labor with machines, computers, robots and talented foreign workers. It used to be that only cheap foreign manual labor was easily available; now cheap foreign genius is easily available. This explains why corporations are getting richer and middle-skilled workers poorer. Good jobs do exist, but they require more education or technical skills. Unemployment today still remains relatively low for people with college degrees. But to get one of those degrees and to leverage it for a good job requires everyone to raise their game. It’s hard….

Not only does it take more skill to get a good job, but for those who are unable to raise their games, governments no longer can afford generous welfare support or cheap credit to be used to buy a home for nothing down — which created a lot of manual labor in construction and retail. Alas, for the 50 years after World War II, to be a president, mayor, governor or university president meant, more often than not, giving things away to people. Today, it means taking things away from people.…

So let’s review: We are increasingly taking easy credit, routine work and government jobs and entitlements away from the middle class — at a time when it takes more skill to get and hold a decent job, at a time when citizens have more access to media to organize, protest and challenge authority and at a time when this same merger of globalization and I.T. is creating huge wages for people with global skills (or for those who learn to game the system and get access to money, monopolies or government contracts by being close to those in power) — thus widening income gaps and fueling resentments even more.

Should we despair, or try to find a silver lining in the positive aspects of creative destruction?

On a related note, 48% Think Spending Cuts Could Trigger Violence.

Middle management jobs will decline further

If you’re hoping your college degree will earn you a spot on the track to middle management, read what Harvard economist Larry Katz said.

“A lot of traditional middle-class, upper-middle-class jobs have been disappearing. If you look at general managers and middle-management jobs, those are ones that have been in decline and will decline further,” he said.

While the article suggests that these types of jobs do not require a college degree, a quick scan of job listings indicates otherwise.

Medical diagnostic work such as radiology is another job category that will experience decline in the U.S.

Also:  Disappearing Middle-Class Jobs