Expand Economic Opportunity by Supporting Community Colleges

They're often the most affordable option for higher education -- if not the only option -- yet public funding for them compared to other colleges is clearly imbalanced, write Austan Goolsbee, Glenn Hubbard and Penny Pritzker.

January 13, 2020
 
 
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Hopefuls for the 2020 presidential election have unveiled their higher education policy agendas, which largely focus on emphasizing debt forgiveness and free tuition as means to make postsecondary education more accessible. The attention on college affordability is indeed merited. It is a top issue for many young Americans saddled with student debt.

But in an era of economic disruption from globalization and technological change, unidimensional investments in the demand side of higher education are insufficient to address the heightening economic inequalities and changing needs of our workforce. The conversation must also include the supply side of postsecondary education: the institutions themselves. And especially, it must include community colleges.

Community colleges are vital in providing the advanced training needed to adjust to new economic realities, especially for workers who are low skilled or in career transitions. They offer both pathways to the completion of associate’s and bachelor’s degrees, as well as career opportunities for students who are not pursuing a degree. And the return on investment in community colleges is particularly high, considering the demographics of their student bodies. With an average tuition cost of just $3,400 per year, to many people, they are the most affordable option for higher education, if not the only option.

Yet public fund allocations for four-year private colleges and universities versus two-year public institutions are clearly imbalanced. Between 2008 and 2018, state resources for public colleges declined by 16 percent. While federal financial aid grew more generous over that period, institutions with higher tuition prices enjoyed the bulk of the benefits. In fact, in 2015, researchers at the American Institutes for Research found that private, high-endowment institutions get a public subsidy per full-time student that is eight times larger than the subsidy community colleges get.

As many studies show, such divestitures are harmful to student success metrics, including grades and completion rates. Only 42 percent of first-time college students who attend a community college eventually complete a degree within eight years. That means a lot of students don't complete their degrees, considering that nearly nine million students attend a community college. Better funding can change that statistic.

Researchers at Harvard University and the University of California, Berkeley, found that completion rates at two-year public colleges were especially sensitive to changes in public support, estimating that a 10 percent increase in institutional funding led to a 14.5 percent increase in degree and certificate completion at two-year colleges.

As members of the Aspen Economic Strategy Group who hold diverse political views, we recently proposed a two-part policy to level the playing field and meet the demands of a dynamic labor market by supporting and harnessing the existing community college sector. Much like the 19th-century Morrill Land-Grant Acts -- a massive supply-side investment in public higher education for the working class -- our proposal would give 30 million more American workers the skills to thrive in a rapidly changing economy.

We propose setting the ambitious goal of raising the completion or transfer rates among incoming, first-time college students at community colleges to 60 percent by 2030, which would equalize graduation rates across both two- and four-year public institutions. We also propose the goal of increasing the share of Americans aged 25 to 64 with a college degree or other high-quality credential from 47 percent today to 65 percent by 2030, which reflects the expected share of jobs requiring advanced skills by that year.

Achieving those goals necessitates a significant increase in public resources, in return for accountable improvements in completion rates, employment and earnings. We estimate an additional $20 billion per year will be needed over the next decade -- roughly equal to a quarter of the current federal spending on higher education. A federal block grant program with a state matching requirement would help undo decades of declining state investment in public higher education.

To avoid penalizing institutions with greater numbers of economically disadvantaged students, the funding formula would need to consider a specific college and university’s student body and local labor market conditions. Each of us has a different view on how to pay for the short-run costs -- for instance, whether to finance such investments by increasing federal deficits, raising taxes on wealthy individuals or diverting funds from other, less effective government programs. But we agree that the benefits of higher future output and earnings would cover those costs many times over.

To keep college affordable while also enabling workers to be more productive, earn higher wages and remain competitive in the global economy, we need to invest in both students and institutions. Community colleges are distinctly well suited to help our workforce retool amid a changing economy, and they represent essential hubs of economic development in many parts of our nation. Empowering such institutions means investing in the futures of people who are already on the margins of the economy -- by equipping them with the institutional resources they need to climb the economic ladder. Let's start there, and let’s start now.

Bio

Austan Goolsbee is the Robert P. Gwinn Professor of Economics at University of Chicago's Booth School of Business. Glenn Hubbard is dean emeritus and the Russell L. Carson Professor of Finance and Economics at Columbia Business School. Penny Pritzker is the founder and chairman of PSP Partners. All three authors are members of the Economic Strategy Group at the Aspen Institute.

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