Why Public Investment in Higher Education Is Good for the Economy

By Lauren Schudde

Social mobility—where an individual rises above his or her social and economic origins—is a key feature of the American Dream. Today, education, particularly a college education, is the means through which a person “works hard” to “get ahead.” The individual stands to benefit from both the skills and the credential gained through higher education, reaping higher earnings and prestige through new opportunities.

But does higher education only offer private returns? Or does society—the public—stand to gain something from an individual attaining more education? This question is at the heart of the constant battle over state budgets across the country. Educational allocations have been among the first on the chopping block in the name of fiscal conservatism. The narrative that pursuing a college degree is the best way to advance one’s career bolsters support for the usefulness of higher education, but also undermines the understanding that public higher education serves the greater good.

Even among the greatest skeptics, it is difficult to deny that localities and states benefit either directly or indirectly from the presence of higher education institutions. The institutions hire workers and train prospective workers. Ideally, after enrollees accumulate skills and knowledge, they then contribute to the local labor market. While institutions vary in their ability to assess and fulfill the needs of the local market, research suggests that public institutions tend to be quicker to respond to changing local labor markets and student demands than private nonprofit institutions.

While it’s difficult to identify the root cause, higher educational attainment is positively correlated with a number of desirable life outcomes, including improved health, marriage stability, and earnings. While, on first blush, it seems like these are individual benefits, it’s important to consider how individual benefits aggregate up. Communities with more educated citizens see positive returns, including lower use of public assistance, less crime and incarceration, and greater civic participation (an excellent review of individual and social returns is available here). Research suggests that public investments in higher education are ultimately paid back by the increase in sales, property, and state income taxes—individuals reinvest their increased earnings—up to fourfold (this research is actually based on Texas). Like private investment in education (individual’s paying for their schooling), public investment in education is as a long-term investment. It ultimately improves the economic growth and health of the community as whole.

Battles to cut state funds for education are often part of a short-term solution, with an eye on the current budget year. It achieves that goal for the state, for one year (and is then often revisited again and again), but has long-term consequences for its citizens. Through financially divesting in public higher education, the costs of college are increasingly placed on the shoulders of the students. While there are a number of reasons for the steep incline in college tuition over the past two decades, the divestment of public higher education is an undeniable contributor. Today, the baby boomer’s story that he worked his way through college—and the assumption that kids today should do the same—is increasingly infeasible and irrelevant.

Starving the Beast, the award-winning documentary by Director Steve Mims, takes a closer look at the shifting landscape of public higher education. Amid the political strategies to reduce government spending, public higher education is caught in the crosshairs. The film tracks the intended and unintended consequences of these political decisions for public research universities in the United States. This battle is still raging on at state capitals across the nation. Public colleges, including community colleges and regional universities that feed the local labor markets of their communities, face the repercussions of these decisions.

The large-looming consequences of this policy strategy are still unfolding before our eyes. The film cannot wrap up this story in a perfect bow. Rather, this is a wake-up call and a call to arms. The public colleges and universities that you once knew are radically different than they once were. With dwindling state funding, they will be less compelled to serve the interests of the state’s constituents. This represents a shift in whether public higher education can or should serve the public’s interests. Many citizens from across the political spectrum see the value of their public colleges and universities. That leaves us with a new question: Is it possible to change our trajectory?

The Humanities Institute, in partnership with the Austin Public Library, will be screening the award-winning Starving the Beast about the power struggle on college campuses over the future of higher education on March 2, 2017 at 7pm at the Terrazas Branch of the Austin Public Library. Director Steve Mims will be present for a brief discussion and Q&A following the film. This event is free and open to the public.

Dr. Lauren Schudde
Dr. Lauren Schudde

Dr. Lauren Schudde is a sociologist of education and an assistant professor in the Program in Higher Education Leadership at The University of Texas at Austin. Her research examines the impact of educational policies and practices on student outcomes, with a focus on higher education policies that can improve degree attainment and labor market outcomes among students from low-income families. She holds a PhD and MS in Sociology from the University of Wisconsin-Madison and a BA in Sociology and Psychology from New York University.

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