College Continuation Rates for Recent High School Graduates in 2005

The college continuation rate for 2005 high school graduates was 68.6%--the highest on record since the Bureau of Labor Statistics began reporting these data in 1959. This broke the previous record of 67.0% set in 1997. Out of 2,675,000 high school graduates 1,834,000 were enrolled in college by October 2005.

Overall this is good news. A growing share of recent high school graduates have heard the message that high school is no longer sufficient to get good jobs and live a middle class American lifestyle. And they have acted on it. But scratch beneath the surface of this data and the picture quickly turns mixed. The good news is that:

• White high school graduates were enrolled in college at a record high rate of 69.4%.
• Male high school graduates were also enrolled at a record high rate of 66.5%. But this is just barely above the rate of 63.2% in 1968. Seems that boys appreciate college more during times of war.
• The non-white college continuation rate was at a record high of 65.2%, but this was entirely due to the rate of 82.2% for those of other race (mainly Asians).

The darker side of these data are:

• The college continuation rates for blacks and Hispanics were both down from previous highs. These numbers bounce around from year to year, so this may simply be a statistical spike. But they should be watched carefully. They are far below rates for whites.
  
• The gap between white and black college continuation rates has been widening since 1999.
• The gap between white and Hispanic rates is the widest for any major minority group.
• The share of college freshmen who were recent high school graduates that are enrolled in 4-year colleges and universities has declined steadily from 68.1% in 2001 to 65.0% in 2005.
  

Most dramatic in these data are the shifting racial/ethnic composition of the annual classes of high school graduates and college freshmen.

• The white share of high school graduates has declined from 93% in 1960, to 89% by 1970, 84% by 1980, 77% by 1990, 70% by 2000 and 66% by 2005. The actual numbers have declined from a peak of 2.8 million in 1975 to 2.1 million by 2005.
  
• Between 1960 and 2005 the minority share of all high school graduates has increased from 7% to 34%. The number of minority high school graduates increased from 41 thousand in 1960 to 555 thousand by 2005.
  
• The white share of college freshmen has declined from 95% in 1960 to 70% by 2005. The minority share has increased from 5% to 30% during the last 35 years.
  

In the new flat earth Global Human Capital economy the rest of the industrial and industrializing world is aggressively expanding college participation rates. Our have languished for the last decade or more. Renewed growth in college continuation rates is very good news indeed.

The Declining Economic Value of a Bachelor's Degree

Labor market economists have recently noted the soft labor market for recent college graduates. Because these data are only for the last few years what has been observed may be a temporary legacy of the economic recession of the early years of this decade. Or, the globalization around 2000 of the Human Capital Economy that began in the U.S. in the early 1970s may now be permanently affecting the labor market for college graduates in ways similar to the outsourcing of manufacturing jobs that has plagued less educated workers for decades.

What is clear is that colleges and universities have continued to aggressively increase the price of higher to students while the labor market for their product--graduates--has softened. A soft labor market for college graduates has not deterred higher education institutions from increasing the prices they charge for tuition, fees, room and board. This disjunture between benefits and costs of a college education has diminished the economic value of a bachelor's degree since 2000 for both men and women.

Our crude benefit/cost calculation is a ratio of the difference between the incomes of bachelor's degrees and high school graduates (ages 25 and over), divided by the price of higher education (tuition and fees, room and board).

• Men: At public universities this benefit/cost ratio has hovered around 3 since 1967. The range has been between 2.56 (1996) and 3.42 (2000). But in 2003 this ratio dropped to 2.58 and by 2004 it had dropped to an all-time low of 2.39.
• Women: At public universities this benefit/cost ratio rose from about 1.2 between 1967 and 1980, to a peak of 1.75 in 1993 and again in 2000. Thereafter this ratio has steadily declined to 1.32 in 2004, or about where it was in 1983.

We get similar results for private colleges and universities. Our crude benefit/cost ratio for men in 2004 is lower in 2004 than it has been for any other year than 1996. The ratio for women is lower in 2004 than it has been since 1982. The directions are all down since 2000.

Unless the income differential between college and high school graduates resumes its historic widening trend colleges and universities will have to curtail annual price increases to preserve enrollment demand for their higher education services. The outsourcing of college graduate jobs will clearly weaken the job market for recent college graduates. To preserve the benefit/cost ratio institutions will have to limit annual price increases to the annual change in the income differential between high school and college graduates.

Look Who Is Coming to Lunch

In FFY2005 43.5% of the K-12 student enrollment were approved for free or reduced-price school lunches under the National School Lunch Program administered by the Food and Nutrition Service of the U.S. Department of Agriculture. To be eligible for this program benefit the student must live in a family with income below 185% of the federal poverty level. The 43.5% figure for FFY2005 is the highest on record in the current Program. In 4 states over 60 percent of the K-12 children are approved for subsidized school lunches: District of Columbia (69.8%), Mississippi (65.3%), Louisiana (63.5%),and New Mexico (60.6%). In five states less than 30 percent of the children are eligible for subsidized school lunches: New Hampshire (19.8%), North Dakota (26.2%), Connecticut (28.5%), Massachusetts (28.6%) and Vermont (28.9%).

The share of K-12 students eligible for subsidized lunches has increased by 6.5% from 37.0% in FFY1993 to 43.5% in FFY2005. The rate of growth in the share of school children living below 185% of poverty has accelerated since FFY2001 when it was 40.0%. Between FFY1993 and FFY2005 the share of K-12 enrollment approved for subsidized school lunches increased in 49 states and decreased in just two states. The largest increases were is: Oregon (13.8%), Indiana (13.5%), Tennessee (13.4%), District of Columbia (13.2%), Idaho (12.9%) and Illinois (12.8%). The two states with declines were South Dakota (14.4%) and North Dakota (1.9%). (The South Dakota data for FFY1993 look fishy to me.)

These children living below 185 percent of poverty represent a very large and growing share of our country's future workforce, voters, citizens and taxpayers. How well we higher educate them when they reach college age will largely determine this country's future economic prosperity, government tax revenues, domestic tranquility, political engagement and vitality and social cohesion. We are doing a simply terrible job of higher educating them now. Our federal, state and institutional policies have been turning away from meeting the preparation, financing and support needs of children from low income families since 1980. We should ponder carefully what we are doing (or not doing) and where we are taking the country with our actions (or inaction) today.