There are many articles investigating the demand and supply framework of higher education, but the valuable investigations of current costs and benefits of a college education are rare. High costs of higher education cause a situation in which an average family cannot pay for education (Ehrenberg, 2009, p. 6). As tuition fees continue to grow, numerous questions about the economic benefit of college education arise (Leonhardt, 2014, par. 2). Jaison R. Abel and Richard Deitz investigate this issue in their article Do the Benefits of College Still Outweigh the Costs? (2014), published in “Current Issues in Economics and Finance.”
The authors explore the issue and determine if a college education can be regarded as a good investment. Jaison R. Abel and Richard Deitz managed to make their article very informative and reasonable, as they investigated the costs, benefits, and economic return of a college education and presented valuable conclusions based on up-to-date data and information related to the issue. Their investigation is of great value for students studying issues related to the topic of the article.
The first part of the article explores whether college education gives a visible economic benefit. Higher wages the person with a college degree can earn are regarded as proof of an economic advantage of attending a college. The authors used data from the March supplement to the Current Population Survey. The authors estimated average wages using a fixed composition approach. They used the linear regression model to estimate average wages “that control for differences in observable characteristics of workers between education groups and over time” (Abel & Deitz, 2014, p. 3). The results reveal an economic benefit of a college education that lasts a lifetime, as earnings of people with a college degree appeared to be much greater than the earnings of those who do not have it.
To estimate the average economic cost of college education, the authors measured both direct costs and opportunity costs. The direct costs are those, which are clearly and directly associated with the cost objective (Guan, Hansen, & Mowen, 2007, p. 25). The authors used the data from the College Board and the U.S. Department of Education to measure the direct costs (Abel & Deitz, 2014, p. 4). The opportunity costs are “the best alternatives sacrificed for the chosen alternatives” (Tucker, 2008, p. 33).
They were estimated based on the data about the average wages of workers with a high school diploma. The authors put the pieces together and estimated the total cost of a college education. The authors’ method of measuring is of great interest to people studying economics, as it shows an effective way of estimating the total costs. The results demonstrate that despite the continuous rise in tuition, the total cost has not experienced some dramatic changes over the past decades. The results are presented in the form of a chart to make it easier for the readers to analyze and understand them.
Education is considered an investment. Therefore it is appropriate to evaluate the internal rate of return to education as for any other investment (Cahuc, Carcillo, McCuaig, & Zylberberg, 2014, p. 215). This method was used by the authors. The results have shown that a college education is a successful investment, as they return to each type of college degree remains well above 7 percent (Abel & Deitz, 2014, p. 7). The authors investigated the dependence between the major and the return to college. Engineering majors and math and computer majors earned the highest return. Healthcare majors also earned an above-average return, as the growth of this sector resulted in higher demand for specialists in this scope. Overall results of the investigation conducted by the authors demonstrate that the return to college remains high on average.
The intended audience of the article consists of young people deciding on their future education and economists interested in the analysis of the economic side of a college education. The authors did their best to reach the intended audience by using proper terms and explaining every issue in detail for those who are not strong in economics. The article is successful in terms of its real-to-life problematic. Obviously, the authors’ primary goal in this piece of writing was to demonstrate valuable information about real return to a college education. To reach the object, Abel and Deitz backed up their argument with the research data and persuasive conclusions. The results of the investigations conducted by the authors can help young people to see the real efficacy of getting a college education.
The article is a perfect example of a successful economic investigation. It presents a detailed analysis of the costs of a college education and can be a good example for students studying the specifics of the cost-benefit analysis. The authors used such terms as direct costs and opportunity costs and demonstrated the right way to assess these activities. The authors have shown that the marginal efficiency of investment in college education should not be underestimated. The article is very useful for students eager to study the specifics of testing costs activities and making appropriate conclusions based on the gained results.
Abel and Deitz managed to demonstrate that the high demand for a college education is based on its economic benefits. The authors investigated the costs, benefits, and economic return of a college education and presented valuable research data, which proves the fact that a college education remains a good investment. The article is of great value for students studying economics, as it demonstrates an effective way of analyzing costs and economic benefits.
References
Abel, J. R., & Deitz, R. (2014). Do the benefits of college still outweigh the costs? Current Issues in Economics and Finance, 20(3), 1-9. Web.
Cahuc, P., Carcillo, S., McCuaig, W., & Zylberberg, A. (2014). Labor economics. Cambridge, Massachusetts: MIT Press. Web.
Ehrenberg, R. G. (2009). Tuition rising: Why college costs so much. Cambridge, Massachusetts: Harvard University Press. Web.
Guan, L., Hansen, D., & Mowen, M. (2007). Cost management: Accounting and control. Boston, Massachusetts: Cengage Learning. Web.
Leonhardt, D. (2014). Is college worth it? Clearly, new data say. Web.
Tucker, I. (2008). Macroeconomics for today. Boston, Massachusetts: Cengage Learning. Web.