Why Are College Degrees Valuable?

The "tea party" governor of Florida recently declared that he wants to eliminate the liberal arts majors at state universities and community colleges because he does not think that they produce job skills.  However, liberal arts majors (humanities, social sciences, science, and math) do better on tests of learning than job-oriented majors like business, education, and engineering:

Liberal arts majors earn less immediately after college, but their incomes grow more quickly than job-oriented majors and ten years after graduation, they earn almost the same amount as job-oriented majors.  That is because the most important part of education is learning how to learn and exercising thinking and communication skills.  This is why economics majors do so well at getting into law schools and have such high earnings: it is a challenging major.  But how much you get out of your education depends upon how much work you put into it.  An economics major who wants to scrape by won't do as well later as one who is challenged by wanting to master difficult material.   

Leonhardt, NYTimes.com:

A century ago, the United States decided to make high school nearly universal. Around the same time, much of Europe decided that universal high school was a waste. Not everybody, European intellectuals argued, should go to high school.
It’s clear who made the right decision. The educated American masses helped create the American century, as the economists Claudia Goldin and Lawrence Katz have written. The new ranks of high school graduates made factories more efficient and new industries possible.
Today, we are having an updated version of the same debate. Television, newspapers and blogs are filled with the case against college for the masses... The evidence is overwhelming that college is a better investment for most graduates than in the past. A new study even shows that a bachelor’s degree pays off for jobs that don’t require one: secretaries, plumbers and cashiers. And, beyond money, education seems to make people happier and healthier.
...the returns from a degree have soared. Three decades ago, full-time workers with a bachelor’s degree made 40 percent more than those with only a high-school diploma. Last year, the gap reached 83 percent. College graduates, though hardly immune from the downturn, are also far less likely to be unemployed than non-graduates. Skeptics like to point out that the income gap isn’t rising as fast as it once was, especially for college graduates who don’t get an advanced degree.
The Hamilton Project, a research group in Washington, has just finished a comparison of college with other investments. It found that college tuition in recent decades has delivered an inflation-adjusted annual return of more than 15 percent. For stocks, the historical return is 7 percent. For real estate, it’s less than 1 percent.
Another study being released this weekend — by Anthony Carnevale and Stephen J. Rose of Georgetown — breaks down the college premium by occupations and shows that college has big benefits even in many fields where a degree is not crucial.
Construction workers, police officers, plumbers, retail salespeople and secretaries, among others, make significantly more with a degree than without one. Why? Education helps people do higher-skilled work, get jobs with better-paying companies or open their own businesses.
...
None of this means colleges are perfect. Many have abysmal graduation rates. Yet the answer is to improve colleges, not abandon them. ...
think about it this way: People tend to be clear-eyed about this debate in their own lives. For instance, when researchers asked low-income teenagers how much more college graduates made than non-graduates, the teenagers made excellent estimates. And in a national survey, 94 percent of parents said they expected their child to go to college.
Then there are the skeptics themselves, the professors, journalists and others who say college is overrated. They, of course, have degrees and often spend tens of thousands of dollars sending their children to expensive colleges.
I don’t doubt that the skeptics are well meaning. But, in the end, their case against college is an elitist one — for me and not for thee. And that’s rarely good advice.

Similarly, the book Poor Economics says that subsistence farmers in developing countries end up earning higher incomes with more education even though their jobs don't really "require" education in any obvious way.