*Editor’s Note: CC Biz Buzz is a monthly column series that features insightful commentary from a member of the Columbia College Robert W. Plaster School of Business faculty.
There is a trade-off between attending college or entering the labor market. Current opportunities in the labor market, coupled with the financial commitment of higher education, sometimes can seem to tip the scale in favor of entering the workforce with less training and education. The true value of higher education is a relevant question that will be critical over the years and decades to come.
The Federal Reserve’s contractionary policy, initiated in March 2022 to control the inflation spiral, should have increased the unemployment rate. However, the labor market has continued creating jobs, confirmed by the 209,000 new openings in June 2023, accompanied by wage inflation provoked by employers attempting to attract the remaining idle resources. Although the new jobs created are lower in numbers than those of previous periods – unveiling the economy’s slowdown and proving that the inflationary pressure has decreased – the new jobs and increased wages in several sectors keep challenging the policy choices’ effectiveness. Under these conditions, rational behavior may dictate that getting a job is better than opting for an uncertain future.
The leaning of the scale toward getting into the labor market begins with the current market conditions. However, since inflationary pressures persist, further tightening of monetary policy should be expected, leading the economy into a more significant slowdown. At this point, the discussion focuses on whether the economy will return to its expected inflation rate without disrupting the market’s stability (soft landing) or whether the correction would be so significant that returning to the target rate will bring market instability (hard landing). A third option may be to reach the targeted inflation with minor disruptions in the market but over a longer period. Regardless, one thing is sure: The immediate future will not have much room for a growing labor market.
Unless the career decision-making process includes a longer-term perspective, some will favor the immediate benefits of today’s labor market over the cumulative upside of a college education. Over the past two decades, school costs have almost doubled, making it harder to decide on a college education. Tuition and fees are becoming major roadblocks. These costs may range between $10,000 and $40,000 a year, to which the student must add room, board, transportation, books and other related expenses.
However, even with all the economic changes, a college graduate is positioned to earn more than a high school graduate over their respective careers. Some researchers estimate this amount to be at least $20,000 more per year, which over a productive lifetime would make a reasonable difference in wealth-building. The labor market is also evolving, primarily due to the adoption of new technologies, demanding new skills potential workers need to learn.
Deciding to enter the labor market immediately after high school could initially prove profitable but likely would not over the long term. If funding is a hurdle to attending college, students can look into options such as student loans (managing them prudently), student work, grants and other cost-reducing opportunities. Deciding on the major to pursue and the school to attend is also critical. Many students decide against degrees that require significant effort and sacrifice or choose schools that may be cheaper and more convenient at first sight. To avoid aligning a degree choice with an expected level of leisure, invest a significant amount of time in finding information about the current and future demand for the skills you desire to develop. Look closely at a school’s reputation, student-teacher ratio, expertise on the major of choice, placement, student aid and more.
In this era of artificial intelligence, robotics and increasing technology adoption in the labor market, the skills and abilities demanded in the future may differ from those under current demand. Teamwork and collaboration are far more critical than individual efforts. People must have the cognitive abilities to get the job done and the social skills to collaborate and make it an enriching activity. During the college years, a person should develop a collaborative character, communication abilities, critical and strategic thinking, decision-making skills, tolerance, persistence, networking, and other qualities that are not always available for those who prefer to enter the labor market earlier.
Before throwing the idea of college out the window, consider how a college degree could act as a passport to greater opportunities. Look around at the skills and abilities in greater demand today, the potential changes the economy and different markets will experience, and their projection over time. Getting a degree with maximum value requires effort and dedication to pursue a career that aligns with personal goals in the short and long term.
If the tip of the scale is going toward entering the labor market, hit the reset button. This will provide a chance to deal with the funding challenges, decide on goals in the longer term and understand why a college degree could result in significant rewards, including increased earnings over a lifetime, more remarkable experiences and the accumulation of a wealth of knowledge with tradable value. This route provides the best chance for a better tomorrow.
Rudy Araujo is an adjunct faculty member in the Columbia College Robert W. Plaster School of Business. He has more than three decades of professional experience as chief executive of an international technical support agency and a high-level public servant. In 2019, Araujo turned his attention to teaching and consulting.