Over the summer, Barack Obama promised a college education program that would produce 8 million more college graduates by 2020. Recently uncovered data from the Bureau of Labor Statistics suggest that this is a terrible idea.

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America is already producing too many college graduates.

Richard Vedder explains:

Over 317,000 waiters and waitresses have college degrees (over 8,000 of them have doctoral or professional degrees), along with over 80,000 bartenders, and over 18,000 parking lot attendants. All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree.

He then produces this table showing the percentages of college grads in low-skilled jobs.

It’s from this table very clear that the demand for college graduates is not keeping with the supply. Increasing the number of college graduates will only exacerbate the problem.

It’s easy to see why Obama could make the foolish assumption that increasing the number of college graduates would be economically beneficial. After all, going to college helped him tremendously. And college graduates earn more money, on average, than lesser-educated peers. So if more people went to college, more of them would earn more money, right?

This reminds me of a certain kind of thinking that you heard a lot about during the housing bubble. Back when George Bush was campaigning to increase home-ownership, he often argued for the social benefits of home-ownership. Home owners were less likely to rely on government, they stabilized neighborhoods, produced positive externalities for everyone.

Of course, the marginal returns from increasing the number of homeowners were minimal and the costs—well, we’re still living with the costs.

Vedder points to a working paper that examines the marginal returns to education.

This week an extraordinarily interesting new study was posted on the Web site of America’s most prestigious economic-research organization, the National Bureau of Economic Research. Three highly regarded economists (one of whom has won the Nobel Prize in Economic Science) have produced “Estimating Marginal Returns to Education,” Working Paper 16474 of the NBER. After very sophisticated and elaborate analysis, the authors conclude “In general, marginal and average returns to college are not the same.” (p. 28)

In other words, even if on average, an investment in higher education yields a good, say 10 percent, rate of return, it does not follow that adding to existing investments will yield that return, partly for reasons outlined above. The authors (Pedro Carneiro, James Heckman, and Edward Vytlacil) make that point explicitly, stating “Some marginal expansions of schooling produce gains that are well below average returns, in general agreement with the analysis of Charles Murray.”

College education may very well be to Obama what the home ownership was to Bush: a government induced bubble that leaves Americans buried under a mountain of debt used to buy an asset whose value just keeps dropping.

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