(Editor’s note: This commentary by Education Policy Director Michael Van Beek is an edited version of an Op-Ed that appeared in the Detroit Free Press on March 18, 2012.)
A group of Michigan legislators recently unveiled a plan called Michigan2020, which would provide about $9,500 per year for every high school graduate in the state to use toward the cost of attending a Michigan university for four years. Proponents say the plan will revitalize Michigan's economy by churning out more college graduates. Unfortunately, it's unlikely Michigan2020 would boost Michigan's economy.
There's no question that individuals can improve their personal economic well-being by earning a college degree. The rub is that these private gains do not automatically translate into public benefits, and pouring more money into public universities through tuition subsidies will not necessarily make the whole state better off or even produce more college graduates.
An abysmal 33 percent of Michigan's high school graduates actually graduate within four years, according to the Chronicle for Higher Education. Worse, for every 100 full-time undergraduate students enrolled in this state's public universities from 2008 to 2010, only about 21 completed any form of degree or certification.
It's likely that under the proposed Michigan2020 plan these rates would actually decline further. High school graduates who choose not to attend college but might if someone else is footing the bill are probably less likely to graduate than their peers. The end result could be more college dropouts, not more college graduates.
The financial benefit for high school graduates under the Michigan2020 plan would likely be short-lived as well. If history is any lesson, increasing government subsidies for goods or services drives up the price of those goods or services. The federal government increased aid for higher education from $10 billion in 2000 to $30 billion in 2008, and colleges responded by hiking tuition at rates that exceeded rising costs for homes and medical care.
Even if this plan bucks historical trends by making college more affordable and increasing the number of students graduating from Michigan universities, there's little reason to believe that the state's economy would benefit. Essentially, the Michigan2020 plan puts the cart before the horse. Little is gained if college graduates cannot find work here and land jobs in other states.
While there are states that have both a large population of college graduations and robust economic performance, research by my colleague James Hohman shows there is no direct causal link between those variables.
Richard Vedder, an Ohio University economist and Mackinac Center adjunct scholar, analyzed 46 years of fiscal data for all 50 states and found a negative correlation between economic growth and state appropriations for higher education. The more a state spent on higher education, the worse that state did economically, everything else being equal.
There are two redeeming characteristics of the Michigan2020 plan. Its estimated $1.8 billion price tag would apparently be paid for by cutting "corporate welfare" by 10 percent, and it essentially "voucherizes" state funding of higher education. Mackinac Center analysts have long-supported these two policies, as they reduce the unfair competitive advantage politically favored businesses and public universities enjoy through discriminatory tax breaks and appropriations-based funding.
Yet the Michigan2020 proposal would fall well short on its promise to take Michigan to the economic promised land by spending more on public universities. If politicians are interested in putting more degrees in the hands of Michigan residents, they'd be better off investigating why so many of them currently walk away from colleges and universities empty-handed.
Michael Van Beek is director of education policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.