By Gary Jason

As Americans spend more and more to get college degrees, more and more people are beginning to question the value the recipients and the taxpayers are receiving.

Certainly, as a percent of GDP, the U.S. spends more on college education than any other developed country on Earth save one. At 2.9%, only South Korea ties us. We outspend Canada (2.5%), Finland (1.9%), Sweden (1.8%), the Netherlands (1.7%), Israel (1.6%), France (1.5%), Austria (1.4%), Germany and the UK (both at 1.3%), and Italy (1.0%).

A recent survey conducted by The Chronicles of Higher Education (together with American Public Media's Marketplace) showed that fully half of all employers report having a problem finding college grads truly prepared for employment. About a third of these employers rated colleges as being mediocre or worse at producing graduates with the necessary skills for success, such as communication skills, problem-solving skills, and adaptability.

Then why do two-thirds of employers demand a degree? Amazingly, the article concedes that part of the explanation here is that a college degree is often just used by employers as a sorting mechanism. After all, a high-school diploma often conveys vacuous information, a result of pervasive grade inflation and social promotion.

Now, this concession — from the chief publicity organ of the higher education industry, please note — is commendable. The Chronicles piece goes on to offer some explanations — or excuses — for the poll results. It suggests that the disappointment felt by employers is in great measure due to their unrealistic expectations that college grads be able to handle the rapidly expanding new technological innovations "straightaway," and the claim by one professor of management that employers' complaints about incoming employees being poorly prepared is an old story. As he claimed, "I understand that those doing the hiring in ancient Greece complained about the same thing."

However, these recent complaints are specific and recurrent: that college grads lack the ability to argue logically and analyze data reasonably, and to read, write, and orally communicate well. The survey showed that while 69% of employers surveyed rated colleges as good or excellent at producing "successful" graduates, 53% said it was difficult or very difficult to find qualified grads. Worse yet, only 33% rated grads as more qualified than 5 years ago.

Some complacent educators give the stock argument — that college grads must be worthwhile, since the unemployment rate for those with Bachelor's degrees is about a third less than the average for all workers (5% versus 7.2%), and only one half of that of people with high school diplomas.

This is a dubious argument. As the Chronicles piece itself acknowledges, this could just reflect the fact that anyone with a BA proves that he or she had the perseverance to stick out four to six more years of school and achieve a goal.

Moreover, the magazine fails to mention another reason employers are using the BA as a sorting mechanism: they face lawsuits if they try to simply test all applicants with a high school diploma to determine if they can read, write, and compute at grade level.

The magazine piece mentions one downside of using college as a sorting mechanism — it crowds out from entry-level jobs those with only a high school diploma. For example, it now takes a Bachelor's degree to get any nursing position.

Of course, there are many other downsides of using a Bachelor's degree as a sorting device the piece. Requiring a Bachelor's for someone who will be taking blood pressure or drawing blood means that the pool of candidates is artificially limited, resulting in higher prices to consumers. And it works to keep the poor perpetually poor — by keeping high-school grads from jobs they would otherwise get because they can't afford college to begin with. Not to mention that it costs the student four or more years and a good deal of money.

Now, there is an intermediate degree, of course — the Associate's degree, awarded by community colleges. Yet a new report on the value of Associate's degrees has caused quite a stir in the academy, one the subject of a long analysis on the Chronicles. The report, "What's the Value of an Associate's Degree? The Return on Investment for Graduates and Taxpayers," was written by Jorge Klor de Alva, president of the Nexus Research and Policy Center, and Mark Schneider, vice president of the American Institute for Research — and former president of the University of Phoenix, a chain of for-profit colleges.

This past association drew immediate fire from David Blaine, an official with the American Association of Community Colleges (AACC), who said, "Community college presidents can't help but raise their eyebrows when a report that paints a negative picture of their institutions is generated by those with such strong ties to the for-profit industry."

What did this report find that was so offensive to the AACC? It found that in 15% (or 85) of the 579 colleges it student, the average salary of those who gain an Associate's degree is less than that of ordinary high school grads. That is, it appears that those students might have been financially better off if they had never gone to community college at all. However, the report did find that overall, on average, most community college grads do earn higher incomes, with a mean increase (over a 40-year work life and compared to students with just a high school diploma) of $259,000 — or about $6,500 a year in higher income.

Turning to the return of community college education to the taxpayer, the study found an overall loss between what the taxpayers spend to support the community college system and the extra taxes (compared to high school grads) collected from those grads over their working lives. The authors note that a big reason for this is the high dropout rates for community colleges. That is, so many students simply take some courses and then just leave that the tax gain from the ones who succeed are outweighed by the costs of those who fail.

Moreover, in states with no income tax, the spread between taxes expended to maintain community colleges and the extra taxes collected from the graduates widens even farther.

Critics of the report noted some methodological flaws. First, the report pegged the lifetime earnings of community college dropouts as only equal to all other high school grads, whereas some of those dropouts might have gone on to get vocational certificates.

Second, the income figures rely on earnings data reported by PayScale, which is a website that collects income information offered voluntarily. This aspect of the report's data set was critiqued at length by Donald Heller, dean of the College of Education at Michigan State.

Finally, the report doesn't count in those community college students who transfer to a four-year college without getting an Associate's degree.

These criticisms are reasonable, and one hopes that a more thorough reports by an economist specializing in the economics of the educational system — such as Richard Vedder, say, or Eric Hanushek — will eventually be done.

Still, I think that the critics are overstating the problems with the report. They might want to reflect on the fact that in many states, the community college dropout rate is in fact grotesquely high. As I have noted elsewhere, 80% of California community college students neither get an Associate's degree nor transfer to a four-year college. It is highly unlikely, then, that the taxpayers are getting a positive return on their investment.

However flawed these reports may be, they both plausibly indicate that Americans have real reason to doubt the facile equation of college education and financial success.

Perhaps this is part of the reason why last year, total college enrollment dropped by nearly half a million (compared to the year before).