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Can Investing in Public Colleges Serve as an Infrastructure Project?

By David Deming·February 2
Harvard University

The Issue:

President Trump and members of both political parties have called for increased investment in U.S. infrastructure as a way to strengthen the U.S. economy. Infrastructure investments usually support the production and maintenance of physical capital, such as the electric grid, telecommunications systems, port facilities, airports, pipelines, bridges, and highways. However, investments in public colleges – our educational infrastructure – can also strengthen the country’s economy. Public colleges provide a high rate of return on investment in “human capital”. Yet decades of declining taxpayer support have allowed them to fall into disrepair, just like our buildings, bridges and roads.
Despite high returns to education, decades of declining taxpayer support have allowed public colleges to fall into disrepair, just like our buildings, bridges and roads.

The Facts:

  • The increase in lifetime earnings from obtaining a college degree makes it one of the best investments a young person can make. One study estimates that lifetime return to a college degree for men grew from $200,000 in 1965 to nearly $600,000 in 2010. This calculation compares earnings of college graduates to earnings of those with only a high school degree, after adjusting for inflation and for rising tuition prices over time.
  • Because they are large and serve many low-income and first-generation students, public colleges are a particularly important vehicle for upward mobility. A recent study found that the City University of New York (CUNY) system alone sends six times more low-income students per year to the top 20 percent of the income distribution than the entire Ivy League combined.
  • The workers hit hardest by globalization, trade and automation are those without a college education. Declining labor force participation is concentrated among workers without a college education. Between 1964 and 2015, labor force participation declined by 13 percentage points -- from 96 percent to 83 percent-- for prime age men with a high school degree or less, compared to only 4 percentage points for men with a bachelor’s degree -- from 98 percent to 94 percent (see here for details).
  • In spite of the high returns to college, total state spending on higher education declined by 37 percent between 2000 and 2012, and has recovered only slightly in recent years, according to data from the Integrated Postsecondary Education Data System (IPEDS). These spending cuts have closed off access to higher education for lower-income families, especially those living in non-urban areas.
  • Spending matters for the quality of education, and for the success of students. Research shows that spending cuts in community colleges and local, open access four-year institutions decrease student enrollment and lower the number of degrees completed. Since 1990, 29 states have cut their higher education budget by 15 percent or more in a single year. The figure above shows enrollment growth in those states in the years immediately before and after the cut. (Since the cuts happened in different years, the horizontal axis is set up as years around each cut - for example, “-1” is one year before, “+2” is 2 years after, etc.) Enrollment growth averages around 2 percent prior to the cut, but drops to between 0 and 1 percent thereafter. State budget cuts lead to slower enrollment growth for up to 5 years afterward. This means that fewer students attend college and complete a degree when states reduce higher education spending.
  • About two-thirds of spending cuts at local, open-access colleges affect core academic spending categories like instruction and academic support.  These schools already operate on a tight budget, and are not using funds for “lifestyle” features like climbing walls or gourmet food options.

What this Means:

A good infrastructure bill should accomplish three goals. First, it should support investments that are “worth it”, meaning projects for which the benefits greatly exceed the costs. Second, the bill should stimulate new economic activity – including creating new jobs – rather than subsidizing projects that were going to happen anyway. Third, infrastructure investments should be targeted to help those who have been most harmed by recent changes in the U.S economy. Investment in local, open access public colleges and universities meets all these criteria. These community colleges and regional four-year public universities serve local labor markets, and are focal points for workforce development programs that especially benefit lower-income students. In today’s rapidly changing economy, a college degree is more important than ever. Investing in our nation’s educational infrastructure is critical for the success of future generations of Americans.

Written by The EconoFact Network. To contact with any questions or comments, please email contact@econofact.org.