Commentary: Higher Ed Spending Myths

Higher spending does not equal more college graduates and more graduates does not equal a better economy

In a presentation for the Institute For Public Policy and Social Research, Michigan State University Professor Charles Ballard argues that more state funding for higher education is a must.

But the main evidence presented does not show his case.

One of Ballard's points is that having a degree is more important than ever, given the decline in manufacturing jobs. Thus, Michigan policymakers should direct more tax money to universities, reversing the decline in direct appropriations in recent years.

One slide of the presentation hammers this point home. In, "This slide is brought to you by the letter 'M'," is this information:

State             College-Attainment Rank 2011         Income Rank 2011

Massachusetts                  1                                                             2

Minnesota                        10                                                           11

Michigan                          35                                                           36

Mississippi                       48                                                           50

While that list fits his narrative nicely, it only does so because it is presented selectively. Other states do not fit this narrative — Alaska and Wyoming have low college-attainment ranks and high incomes, for example.

But the main problem is that the list above is only a snapshot in time. To show that spending more on appropriations to select universities is worth the cost, the most important things for proponents to show would be:

  1. That higher spending leads to a better graduation rate.
  2. That more college graduates means a better state economy.

Neither of these points is true. Higher spending does not equal more graduates and adding more college graduates does not equal a better economy.

Looking at what those states actually spend on higher education per capita yields this order, according to the State Higher Education Executive Officers: Mississippi ($313), Minnesota ($258), Michigan ($189), and Massachusetts ($173), pretty much the opposite of Ballard's point.

Broadly speaking, having a good education can make people more valuable in an economy. But simply adding college degrees, referred to as "talent mercantilism" by my colleague James Hohman, is not the same thing as adding educated residents.

Consider which is more valuable, a recent college graduate with a psychology degree or someone who recently completed a tradesman program as a welder. Bear in mind that psychology is the second most popular college major and that welders are a high need position.

In an email, Ballard noted, pointing to a separate presentation by former state demographer Ken Darga, that the out-migration of Michigan graduates is a big problem and he emphasizes things he thinks the state can do to attract and keep them here.

But on the issue of spending more on higher education via direct appropriations, the evidence is fairly clear. More spending does not equal more graduates; more graduates does not automatically mean a better economy; and more schooling does not necessarily mean more education. Worse, government involvement in higher education has led to distorted incentives and a poor return.