Public Release: 

Housing boom hurt college enrollment as young people chose jobs over school

Decision to skip college dimmed long-term career prospects for some workers, hurt economic recovery

University of Chicago Booth School of Business

It's tempting to skip college if a good-paying job is easy to get.

The decision to go to work instead of school during the last housing boom turned out to be costly to students, and quite possibly a drag on the economic recovery.

In a study from the University of Chicago Booth School of Business, released by the National Bureau of Economic Research, researchers find that the housing boom of the mid-2000s substantially lowered college enrollment and attainment for both men and women by raising the "opportunity cost" of going to college, especially for students on track for community colleges.

The working paper, "Housing Booms and Busts, Labor Market Opportunities, and College Attendance," by Chicago Booth Professor Erik Hurst, University of Chicago Harris School of Public Policy Professor Kerwin Kofi Charles and Northwestern University's Matthew J. Notowidigdo, finds that the U.S. housing boom accounts for about 30 percent of the recent slowdown in students attending college.

Using detailed labor market data, the researchers find that the housing boom increased the employment and average wages of men and women without a college education. As the housing market soared, so did wages and employment openings for jobs tied to the bubble - such as real estate, construction, insurance, finance and retail. Indeed, regions with the biggest housing booms experienced the greatest slowdown in college enrollment.

The researchers also found that the positive employment and wage effects of the boom were generally undone by the bust. When the housing market crashed and the recession began, the students who had skipped college didn't go back to school and were unable to catch up with their more educated peers. The findings suggest that reduced educational attainment remains an enduring effect of the housing cycle.

"Our results suggest a 'scarring' effect on individuals who had the bad luck of being college-going age during the historically unprecedented boom and bust in housing," the report said. Such educational scarring can also help explain the decline in labor productivity in the U.S. in the aftermath of the recession.


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