Most reports that claim to measure the value of a college degree do not control for a vital factor — the student. They fail to account for what Bryan Caplan calls the “ability bias“. This bias favors personal traits like intelligence, work ethic, and conformity — traits typically valued by selective schools as well as by employers seeking candidates for high-income jobs.
Psychology professor and author Christopher Chabris explains how the recent PayScale College ROI Report means very little unless ability bias is factored into the equation.
This means that the Return in this “ROI” depends on much more than the Investment. It also depends on who is doing the investing. In fact, it is far from trivial to figure out the true ROI of going to Harvard versus Wayland Baptist versus Nicholls State versus not attending college at all. To figure this out, you would have to control in the analysis for all the characteristics that make students at different colleges different from one another, and different from students who don’t go to college. Factors like cognitive ability, ambition, work habits, parental income and education, where the students went to high school, what grades they got, and many others are likely to be important. In fact, those other factors could be so important that they wind up explaining more of the variation in income between people than is explained by going to college—let alone which particular college people go to.
Even controlling for data we might be able to obtain, like the average SAT score of students who attend each college, or their average parental income, would not completely solve the problem, because there could be factors that we can’t measure that have an important effect. Only by randomly assigning students to different colleges (or to directly entering the workforce after high school) would we get a fair estimate of the true ROI (measured in money—which of course leaves aside all the other benefits one might get from college that don’t show up in your paychecks for the ensuing 20 years).
Look beyond the school name when predicting financial success.
While a degree from Harvard certainly has the signalling capacity and network connections that can boost earnings opportunities for its graduates, the characteristics of the students who enroll there figure prominently in determining future employment success. Families should keep this in mind when they find their children shut out of admission to elite universities. It’s not all about the school.