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The worldwide boom in higher education has led to higher earnings and better living conditions across the board for people with college educations, said Gary Becker, University Professor of Economics and of Sociology. “I’ve often challenged people to name a significant aspect of human behavior where college people do worse than people who didn’t go to college,” Becker said during a Becker Brown Bag Series talk, sponsored by the Becker Center on Chicago Price Theory at Harper Center on May 14.
College-educated people are healthier, their children achieve more, they respond better to crises, and they manage financial assets better, he said. These advantages are the result of a combination of factors, including more emphasis on knowledge and information in the modern economy than even 30 years ago, Becker said.
“Higher education makes people much better at commanding and investing in knowledge and information than people with less education,” he said. “As you get more education, you get more skill at processing, evaluating, and acting on information. That’s a more intangible factor. For example, a general liberal arts education and other educations make you a much better utilizer and processor of information.”
The rate of return on earnings for higher education is about 10 percent for men, Becker said. If health and other factors are included, that rate would likely grow to 15 percent or more for men and women, he said. “That’s counting the value of health, life expectancy, and other benefits,” Becker said. “College, at least on the average, pays off very well, not just in the form of earnings.”
On one hand, that high rate of return creates inequality in total utility, he said. “On the other side of it, you can say that the high rate of return on human capital is good,” Becker said. “We’re getting more bang for the buck on the sizable amount American men, women, the government, and private philanthropists invest in higher education. The challenge, or problem, is why aren’t more people getting a higher education? How can we get more people to take advantage of these huge benefits?”
High school students can be better prepared for college by providing government vouchers to allow them to attend schools of their choice, creating differential pay for good teachers, weakening teachers unions, investing more in early education, and improving family life, he said. “That last one is very hard to do with any specific policy, but I think it is very important in explaining why the United States does not have sufficient preparation of high school students for college,” Becker said.
Perhaps students also should have more ability to borrow money for college, he said. “It’s a good investment,” Becker said. “When a student says, I’m $100,000 in debt from financing my college,’ I say, ‘So what?’ That’s small, relative to the benefits you’re getting. I don’t think students borrow enough. It’s wrong to say you shouldn’t have debt after college. It’s like saying you shouldn’t borrow money to buy a house.”
In 1960, 7.5 percent fewer women than men started college, he said. Today that trend has completely reversed, with 7.5 percent more women than men starting college, Becker said. “That’s a huge swing of 15 percent,” he said. “The number of women starting and completing college has shifted significantly.”
One reason for this shift is that getting a college education has changed from posing a disadvantage to creating an advantage for women seeking to marry, although the benefit is no greater for women than men, he said. “The increase in benefits for health and other factors may be more important to women than men because in most families, we have a lot of data that suggests women are more responsible for health and these other factors,” Becker said.
A crucial difference between men and women is that women have a more homogenous response to the change in the benefits of higher education, he said. “For example, there is less variability in grades among women,” Becker said. “Marginal women, or those contemplating going to college, are more likely to have similar grades to those already getting a higher education. So it’s going to be harder to attract the marginal men than marginal women.”
Becker provided a very human perspective of human capital, the base of any business, and its importance on society as a whole and business in general, said first-year student Juan Vuichard. “The key takeaway is that education brings benefits to people other than income,” Vuichard said. “Those benefits include living a longer life or even a happier life.”
--Phil Rockrohr