The higher education bubble has popped
Traditionally, Americans have firmly believed in two core investments: college and home ownership. Then the housing bubble popped. Is education next?
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Perversely, while the market tries to clear away malinvestments in finance and real estate, plus the jobs that supported them, colleges continue to turn out more business majors than any other discipline. In 2007 and 2008 there were more than 335,000 business degrees granted — 100,000 more than a decade before, according to the National Center for Education Statistics.
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At the same time as law schools have a building boom underway, many new law grads can't find work or are working temporary jobs at $15 an hour.
David Segal reports for The New York Times,
As other industries close offices and downsize plants, the manufacturing base behind the doctor of jurisprudence keeps growing. Fordham Law School in New York recently broke ground on a $250 million, 22-story building. The University of Baltimore School of Law and the University of Michigan Law School are both working on buildings that cost more than $100 million. Marquette University Law School in Wisconsin has just finished its own $85 million project. A bunch of other schools have built multimillion dollar additions.
And while law grads can't find work, law schools are enrolling more students than ever before at tuition rates of $40,000+ a year. Segal explains that law-school tuition has increased at 4 times the rate of undergraduate education, which itself has increased 4 times the CPI. "From 1989 to 2009, when college tuition rose by 71 percent, law school tuition shot up 317 percent."
Students and their parents are investing in the higher-order good of a college degree, in the mistaken belief that plenty of jobs await college graduates at the end of four or six or seven years. However, time preferences haven't changed. The demand for consumer goods remains, and that's where the jobs are. The boom in demand for bankers, barristers, and bureaucrats is over.
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