Will Online Higher Ed Widen the Income Gap?
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The Fiscal Times
January 16, 2013

The potential for massive, open, online courses (“MOOCS”) to widen and improve educational opportunities has been widely noted, and many see broadening educational opportunities as a remedy for rising inequality. Some observers even predict that low-cost, quality online education will mean the end of traditional brick and mortar institutions.

But traditional colleges are not going away, and the potential of online education to reduce inequality is overrated.

UC Berkeley economic historian Brad DeLong reminds us that this is not the first time there was fear that technology would end traditional education. Before the printing press was invented, books were extraordinarily expensive and only a select few could afford to own copies of the great works. The equivalent of college course was a lecturer reading the book to a group of people. As DeLong observes, “the notes [a student] took away and the memory of hearing the book were third-rate compared to the second-rate possession of the book of a first-rate thinker. But it was good enough. And so the western medieval universities grew and flourished.”

Then came the Gutenberg press, and there were worries that the widespread availability of books would lead to the demise of universities. Why pay someone to read a book to you when you can read it yourself? Books had replaced the need for a Socrates to lecture in person, and now books could carry his thoughts to a much, much wider audience.

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But there was still a need for someone – professors – to explain what the books meant. A student could struggle with a particular book and perhaps understand its true message with enough work, but it was much more efficient to have a professor short-circuit this process by telling students what to look for in the texts, to highlight the important points, to bring in extra materials, problem sets, and so on to facilitate learning.  Today, most students hardly read the originals at all, they rely instead upon the interpretation of experts at universities.

Online education will follow a similar path. It may reduce the number of traditional colleges, especially state supported brick and mortar schools. With so many budget pressures, why pay the huge amount it costs to support state colleges when a much cheaper alternative is available? But it won’t eliminate traditional colleges, especially private ones. If anything, those that remain will become more, not less valuable.

This is because anything that can be done online can be easily incorporated into a traditional college course and then augmented in ways that cannot be duplicated online. For example, “watch the video” is just another class assignment, and it’s no different from textbook reading assignments or problem sets. The videos of the famous lecturer, like the textbook from the famous author – the one who explains things so well – can be augmented with the professors own explanations, problem sets, material, and cutting edge developments that came after the video’s production.

Traditional universities can also offer real, hands on laboratory experience, the opportunity to participate in actual research, and help with internships. They are a source of valuable job or graduate school recommendation letters, and they offer exposure to diversity, art, plays, sports, and talks from famous people. It’s a relatively safe place to grow up away from parents, and a place like Harvard can offer connections to wealth, power, and opportunity that cannot be found elsewhere.

Let’s face it, Harvard may offer an online degree to large numbers of people, but it isn’t going to dilute the value of its traditional degree. Harvard’s value lies in segmenting the market, and it will surely differentiate its traditional degree from the one available online. The argument is simple. The traditional education has everything the online experience has to offer, and much, much more.

But even if online education crowds out traditional state-supported institutions and broadens the gap between the elites and everyone else, won’t the increased availability of education make US workers more competitive worldwide? Won’t this raise their incomes? Not necessarily.

Online education may very well broaden the availability of college classes within the US, but it will also widen the availability worldwide. In fact, its biggest impact may to bring education to developing countries, and that will make it much more difficult for US workers to gain an advantage on this front. It may turn out, for example, that low-cost worldwide online education will increase the supply of educated workers faster than demand increases, and this would bid down the wages of all but the most specialized jobs – those available mainly to graduates of prestigious, private, traditional institutions.

Online education has the potential to lift the incomes of people throughout the world. Because of online education, many people will end up much better off than otherwise. But we should not rely upon online education as the primary solution to the problems workers face due to globalization, technological change, and a political environment that puts the interests of business above those of the working class.

University of Oregon macroeconomist Mark Thoma writes primarily about monetary policy its effect on the economy. He has also worked on political business cycle models. Thoma blogs daily at Economist’s View.