Dad Should I Go To College and Will You Pay For It?

Dad Should I Go To College and Will You Pay For It?

The answer depends on the intention.  If it is the intent to (a) avoid going to work i.e. extended day-care or (b) defer entry into the real world of self-dependence (assuming you can get someone else to pay the costs or you will finance the costs with debt that you neither intend or are able to discharge) then ABSOLUTELY, ENJOY!  On the other hand if the intent is to make a rational decision based on lifetime economics and return on investment, lets take a closer look.

When I asked myself this question in 1965 (it was clear that college was an option only if I paid for it) I answered –yes.  But I did not, I am sorry to say do an analysis of the net present value of the education.  So here is my retroactive analysis;

Cost of Education = Out-Of-Pocket Cost of Education (tuition, books, fees etc., net of scholarships, and fellowships) + loss of earnings while continuing education (measured by probable earnings as a high school graduate) – part-time earnings during education = the

Value of Education = actual earnings as a college (and law school) graduate –             probable earnings as a high school graduate – Cost of Education

To refine the calculation we might look at the full cost of education, not just the portion paid by me, which we can measure by making the assumption that the state-public school system I attended had a cost not greater than the equivalent private schools offering a similar education in the same geographic location.  The of course reducing all cost to comparable dollars through a present value calculation.

When I do this analysis for myself going to college and on to grad-school was a very clear winner.  But this was as of 1965which is interesting but not instructive for those looking to make the decision today.  The same analysis performed for my daughters (using average costs and earnings) and starting in 1990 is a closer question but still yields a very positive result.  Again, this is interesting but not instructive.

The factor absent from these calculations is one that did not exist in 1965 or 1990.  In the job markets that existed at those times there were plenty of opportunities for employment without a college education, albeit at lower compensation, slower advancement opportunities and levels.  In 2013 the job market is noticeably and remarkably different in at lease the following particulars;

  1. The top-line unemployment rate has gone from the 4-6% range to 7-10%, and that is despite the facts that both the labor force participation rate (63.3%) and the ratio of those employed to the total population (56.8%) have fallen to new lows!
  2. Recent college graduates, predominantly falling in the 20 to 29 year old age category have seen overall employment, for their age group, fall in just the last 5 years by in excess of 1.1 million jobs! (In fact there are more than a million fewer people in the 16 to 25 year old category employed today than in 2007!)
  3. Although there are approximately the same number of high school drop-outs and those with only a high school diploma in 2013 (over age 25) employed, as there were in 1990 there are more than 27 million more people employed with at least some college than in 1990!

This leads to the conclusion that college now serves, at least, as a gate-keeper or threshold to employment, whether or not it enhances the net lifetime present value of earnings.   On the other hand it may just be that there are more college graduates available in the labor market, irrespective of learned skills, and employers have concluded that they might just as well hire someone who at least has shown some interest in learning skills, by attending college, whether or not those skills are applicable in the work place.

However, this information should also be included in our formulaic calculus, as suggested above.  And for this I would suggest that the resultant Value of Education be adjusted by weighting the result by the increased likely-hood of finding employment over an individuals lifetime, in other words by the inverse of the differential between those who are employed with and without college attendance.

As an example of the calculus as of 2010:


  1. Annual wage of an employee without any college in 2012 $22,000 at high school graduation
  2. Annual wage of an employee with some college in 2012 $40,000 at college graduation
  3. Increasing rate and ceiling on earnings for attending college over not attending 50% (premium on earnings acceleration 50%)
  4. Out of pocket cost of state undergraduate college education (tuition, fees, books, living expenses) per year $14,000
  5. Same as 3 for non-residents $36,000 thus representative of the full cost of education
  6. Living expenses during college $18,000
  7. Age of graduation and workforce entry 24
  8. Length of work force participation 41 years (to age 65)
  9. Cost of money 6%

10. Average number of years to graduate college 5

11. Adjustment factor for a lifetime of better employment opportunities 115%


  1. Out of pocket cost of education – 5 X ($22,000+$14,000+$18,000)=$270,000
  2. Societal cost of education– 5 X ($36,000-14,000)=$60,000
  3. Total cost of education $330,000
  4. Differential in life time earnings (nominal) 41 X $18,000=$738,000 X 150% (for accelerating earnings potential) = $1,107,000 X 115%
  5. Present Value of differential of life time earnings at 6% $479,000 approx
  6. Differential between 3 and 5 $249,000

Now having said this if your money is worth less than 6% the differential increases.  Similarly reducing the number of years of college, the cost of college or increasing the differential in earning over time, for the college graduate.  Of course in each case the reciprocal is also true.  Bottom line, college is THE BEST CASH INVESTMENT a parent can make in a child, provided ONLY THAT the child is willing to invest their energy in their own future!






5-15-13 by Ronald C. Lazof


Trend is Toward Fewer Hours Not More Jobs
First, let me offer congratulations to the 165,000 families who’s personal unemployment rate went from 100% to 0%, always a joyous event, both in terms of economics, as well as self-worth and esteem, during the last month!

Unfortunately, it is widely estimated that the minimum average monthly number of new jobs needed, to maintain both work force participation levels and reduce underemployment and unemployment numbers (U6 is currently in excess of 22,000,000 Americans, and the civilian work force increases by more than 200,000 a month) is 250,000!  And the percentage of those employed to our total population has now shrunk to a  low of 56.8%.  This is a different number than the civilian work force participation rate which is now at 63.3% (the ratio of those in the work force to those that are employed and unemployed and still looking for work.)  Of the 165,000 added 176,000 were in the private sector.  This is also a cause for celebration, as it means government employment shrunk by 11,000!

Let’s look closer at one segment of the employment numbers, that of the food and beverage (sometimes denominated as the leisure and hospitality) industry.  We were told that included the 165,000 new jobs were 39,000 jobs in this sector – that is clearly a good thing.  We were also told that included within the 165,000 new jobs were 278,000 involuntary part-time and 163,000 voluntary part-time or temporary jobs, for a total of 441,000 new part-time jobs, which in turn means that the reciprocal or 276,000 FULL-TIME JOBS WERE LOST – CLEARLY NOT A GOOD THING.  Part-time being defined as all jobs less than 32 hours per week. During the past year involuntary part-time employment increased by 222,000 jobs.  Another factor to consider is that the average work hours continued to fall and is now down to 34.4 hours.

If we put all of this information together with the number of total jobs existent in the food and beverage sector we can easily make an explanatory supposition that this increase is related causally to Obama-care.  We know that employers in general are acting to arrange their affairs to comply, or avoid the necessity to comply, with the mandatory coverage and penalty provisions.   This would naturally lead to reduced hours, less than 30 per week and additional part time employee head-counts, at the ratio of 3 to 1.  In other words if an employer has 21 employees capable of part time scheduling and had previously had them working 40 hours, the employer could now provide the same hourly coverage with 28 employees working 30 hours per week.

There are 14,000,000 employees in the food and beverage sector of the labor market. If only 50% of those jobs were capable of part-time scheduling and only 50% of the employers capable of scheduling those employees were to make this calculation and take the above action, this would result in the “manufacture” of 1,112,000 additional “jobs” (all of them part-time) and the loss of 3,500,000 fulltime jobs, having the result of changing the “Job Report Top Line Unemployment Rate from 7.6% to 6.8% without doing our economy any good at all!

Perhaps that is the real intention of Obama-care; if we can just (a) encourage more employers to make their employees part-time and (b) encourage more former employees to leave the work force we can drive the Unemployment Rate down and at least claim to have a fully recovered economy, unless of course you really care about more than just having fun with numbers!