Projected increases in demand for postsecondary credentials in the labor market have exposed an immediate need for the United States to significantly increase its college attainment rate. The current growth rate of college tuition and fees, however, has been outstripping inflation for decades, and is limiting access for a growing number of would-be college students. Significant variance in college tuition and financial aid levels among states complicate the issue, having prevented researchers from finding the true indicators that govern college tuition levels. I posit that increased future earnings potential is one of these indicators causing tuition price variance throughout the U.S. Specifically, each state’s college wage premium – the amount a college graduate can expect to make over a high school graduate – causes its tuition prices through a supply/demand equilibrium. I hypothesize that the average public college tuition in a state is directly correlated with its college wage premium. Colleges in states with a high premium have a more valuable product and are able to charge more. I test this by collecting data from College Board and the U.S. Census Bureau on average college tuition and median-level college wage premium, and run a simple OLS regression to determine the strength of correlation. I then discuss my results in the context of the United States’ college attainment goals.
Public college affordability has been decreasing alongside social mobility, while income inequality has been increasing. This thesis explores the interrelations between these three themes in a greater systems framework and attempts to clarify where the United States’ economy is heading. This thesis proposes a four step methodology for understanding these interrelations and creatively constructs a measure of affordability from the perspective of the average student across the variables tuition, financial aid, government appropriations, and median income. By examining these variables within this measure of affordability, this research is able to contextualize macro trajectories of many economic variables to better understand the present economic situation. The data for all of the variables comes from four sources: College Board, Grapevine Illinois, FRED, and the Census Bureau. This thesis concludes by stating that these themes are indeed part of a multidimensional system, but are not causal predictors of each other.