Opportunity Cost of Going to College

Neela Houshmand-Period 6

Whether you decide to enter college for the next four (plus) years of your life or choose a different path like the work force, numerous factors come to mind; most people, specifically high school graduates see that college is the next step, but they fail to consider the amount of debt that they may encounter in college or even the amount of income that could be lost each day. These factors are known as the opportunity cost of attending college. “Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action.”[1] Charles Wheelan, author of Naked Economics, states that “every decision that we make involves some kind of trade-off.”[2] This is why we must think about our opportunity costs because if we choose one option over the other then we would give up our resources such as time, money, and opportunity to participate in something else. Moreover, this essentially represents scarcity; scarcity and opportunity cost affect each other directly. This being said, scarcity only allows a restricted amount of resources so when we use these scarce resources towards college, we are giving up our time, money, and opportunity that we could be investing in other options like the work force.

The most important factor of production is labor which is anything that involves a human’s physical or intellectual services. “In modern industrialized economies, like the United States, labor accounts for about two-thirds of the production.”[3] So, when high school graduates choose the direction of college, they negatively affect the labor force. Statistics show that in 2014, 65.9% of high schools grads were enrolled in college whereas 74% of high school grads chose the labor force path meaning that they were looking for work or were already working.[4] Additionally, in 2014, the bureau of labor statistics reported that “51% of the high school graduates who did not go on to college had jobs by October.” [5]

When we look at the difference between a student attending an in-state college verses a student going straight to the work force, money still stands as a major factor as I mentioned earlier. Now which is “better” in terms of money when only looking at the span of four years? Let’s say that a student chose the path of going into the labor force and found a job as a real estate agent. The median salary for a real estate agent is about $45,810 a year which multiplied by four is $183,240 plus some bonuses over the years. [6] However, an average student enrolled in a moderate in-state college pays or may even owe $24,610 a year.[7] When you multiple $24,610 by four, that is $98,440 plus the $183,240 of lost income. In total, the student who chose college ends up with a $281,680 difference than the student who chose the work force.

Even though choosing the path of work may seem like the better option in terms of money, a person with a college degree will receive better job opportunities than a person with only a high school degree. College may be an important path for most high school graduates, but deciding to go to college is not a simple decision, you must take into consideration all the opportunities that you would be giving up.

[1] Staff, Investopedia. “Opportunity Cost.” Investopedia. November 15, 2016. Accessed March 23, 2017. http://www.investopedia.com/terms/o/opportunitycost.asp.

[2] Wheelan, Charles J. Naked Economics: Undressing the Dismal Science. New York: Norton, 2002.

[3] “Labor .” AmosWEB is Economics: Encyclonomic WEB*pedia. Accessed March 23, 2017. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=labor.

[4] Norris, Floyd. “Fewer U.S. Graduates Opt for College After High School.” The New York Times. April 25, 2014. Accessed March 23, 2017. https://www.nytimes.com/2014/04/26/business/fewer-us-high-school-graduates-opt-for-college.html?_r=0.

[5] Norris, Floyd. “Fewer U.S. Graduates Opt for College After High School.” The New York Times. April 25, 2014. Accessed March 23, 2017. https://www.nytimes.com/2014/04/26/business/fewer-us-high-school-graduates-opt-for-college.html?_r=0.

[6] “Real Estate Agent Salary.” Real Estate Agent Salary. Accessed March 23, 2017. http://www.payscale.com/research/US/Job=Real_Estate_Agent/Salary.

[7] “What’s the Price Tag for a College Education?” COLLEGEdata. Accessed March 23, 2017. http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064.

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