Could Accelerated Learning Mean Big Bucks?

Reuven Brenner of The American explores the economic benefits of shortening college to three years:

Assume that after graduation the average salary would be just $20,000 and remain there. With 4 million students finishing one year earlier, this would add $80 billion to the national income during that year. Or at an average annual income of $40,000, it would add $160 billion. Assume now that the additional $80 billion in national income would be compounding at 7 percent over the next 40 years. This would then amount to an additional $1.2 trillion of wealth – for just one generation of 4 million students joining the labor force a year earlier at a $20,000 salary. At $40,000, this would amount to $2.4 trillion by the fortieth year – again, for just one generation of 4 million people joining the labor force a year earlier. The added wealth depends on how rosy one makes the assumptions about salaries or compounding rates. Add 10, 20, or 30 generations, each starting to work a year earlier, and the numbers run into the tens of trillions of dollars.

The indirect impacts may be as significant. One or two years of additional, compounding earnings could do a lot to shore up entitlement programs, with a more positive impact than requiring people 65 and older to stay in the labor force much longer: the magic of resulting compounding would start earlier.

(HT: The Dish)

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  1. frankenduf says:

    this presumes the purpose of going to college is to make money

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  2. James says:

    Seems like there are some over-simplified assumptions here. What about those who already take more than the standard four years, because they work to pay all or part of the costs? Likewise, in technical fields much of the last year may be largely internship, which is often fairly well paid.

    It would seem that the only way this could work is if high school graduation standards were tightened, so that most students would get the equivalent of the freshman year of college in high school.

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    • Enter your name... says:

      The benefits are the same whether it’s “finish in three rather than four” or “finish in four rather than five”. It’s one extra year’s earnings either way.

      I assume that this would be achieved either by making college year-round (take 16 credits per semester plus 8 in the summer) or by taking on heavier course loads (take 20 credits per semester, and push students to stop working and stop socializing).

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  3. Akib says:

    The maths, indeed, are correct, but should be taken with some grain of salt b/c it implicitly assumes that an additional year of education in the undergrad doesn’t add any value whatsoever. It plays with the benefit side only but doesn’t consider the forgone earnings due to the decline in human capital which would have accumulated from the 4th year of education. Am I missing something here? Indeed, the net benefit could indeed be positive but a total indifference to the cost side does hurt this type of theory’s credibility.

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    • nobody.really says:

      Exactly.

      Heck, if shaving one year off of college would produce these benefits, I bet we could get twice the benefits by shaving two years off! And three times the benefits by shaving three years! Heck, just think of all the good we might accomplish if we sent kids straight to work immediately after they received their college acceptance letters!

      And this isn’t entirely crazy. There’s some support for the idea that elite colleges don’t so much CONTRIBUTE human capital as SORT human capital. The majority of the productive capacity of a Princeton grad existed at the time she entered the college. Sure, Princeton contributes something to her productive capacity — but additional years in the workforce would also have contributed something.

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    • nobody.really says:

      Exactly. If we can save so much money shaving one year off of college, how much could we save shaving TWO years off? Or three? Heck, think of the productivity gains by sending kids into the workforce just after they receive their college admissions letters?

      This analysis illustrates the weakness of assuming that a person’s productive capacity is not enhanced by an additional year of study. But this analysis is not entirely crazy, either.

      Some research suggests that elite colleges don’t so much CREATE human capital as SORT human capital. Elite colleges pick the cream of the crop, babysit them for four years to weed out a few screw-ups that got through the admissions process, and then attach their seal of approval to those who make it through the process. If you subscribe to this view of elite colleges, then an employer could save some time (and money?) by recruiting employees from the college’s FRESHMAN class. The employer could harness the power of the college’s sorting function and not waste time on the college’s overrated education function.

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  4. duke says:

    Sorry, i’m not good and new at this. So please let me know, if i misunderstood or if there’s anything worth/fun discussing;

    What if that additional $80 billion is not actually additional? Says most of the companies have budget to spend, including human resources. Hiring a new grad of accelerated or not will make no difference on the company’s side, as there’s only certain spots to be filled, certain money to be spent. No extra seat or extra money for accelerated ones.

    On the other side, If that’s the case, instead of having addition to national income, we may get higher employment competition. Additional supply of 4 million added every year may flooded the demand and lead to competition of salary and benefit. (i.e. job candidates need to lower their expected salary and benefits in order to get the job they want)

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  5. Meg Silvern says:

    And, not paying for the fourth year of college. There’s even talk of shortening high school.

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  6. Michael says:

    Not sure I understand where the extra money is coming from. If you start earning money sooner, you’ll reach your retirement goal sooner, and stop working. An extra year of salary early on, with compounding, might let you retire more than a year earlier. Your entry level salary would be less than your last year of work salary, so your job income would be less. Your total income would be the same either way, enough to reach retirement. Not seeing where these extra trillions would be.

    If anything, fewer years of work would seem to reduce total GDP. Also skeptical about the savings/compounding angle. Your savings rate in your first year of work is probably the worst it’ll ever been in your working age life.

    But it probably wouldn’t hurt anything, so it’s a good idea. College doesn’t really do that much to prepare you for working. It helps a little, but I doubt anyone’s more skilled after 4 years of college than they would be after 4 years of instead doing the actual job. Going to college is all about signaling that you’re one of the better potential workers, for recruiters.

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    • James says:

      “If you start earning money sooner, you’ll reach your retirement goal sooner, and stop working.”

      That assumes that retirement is a goal, instead of something to be avoided. Like many people – for instance, my 98 year old neighbor, I enjoy what I do, and I enjoy being productive. Why should I stop doing this just because my personal calendar has passed a certain date? It’s not about money: if that was all that mattered, I could’ve stopped working a decade or so ago.

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    • tung bo says:

      I must point out that College prepare youths for the working world in many ways beyond merely acquisition of skills. For many students, it is the first truely diverse population that they have a chance to socialize with and get to know. It is also the first time many of them are exposed to a wide range of ideas and possible careers. The experience would better prepare them to work with a diverse range of people (necessary with all the global connections that we have) and hopefully select a career better suited to their inclinations and aptitudes.

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  7. Shelly says:

    This sounds like a great idea on the surface, but it assumes that the job market could actually absorb more people without experience entering the workforce. Judging by the number of unemployed recent graduates I think it is unlikely that is the case.

    I also find it difficult to believe that most college students are not currently working, at least part-time if not full-time. Anecdotally, I know a number of people, including myself, whose income actually declined the first year or two after graduation because they made more money waiting tables or working in retail than they did at their first real job in their field. I think the author is grossly underestimating the number of college students who also hold jobs.

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  8. Jared says:

    Assuming they can all get hired. Unemployment is the highest in the youngest age bracket.

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