Posts tagged ‘college premium’

June 2, 2014

Let’s be clear, going to college is not always ‘worth it’

by Grace

There has been pushback on David Leonhardt’s message that going to college is “clearly” a smart economic choice.

 

Matthew Yglesias is critical of Leonhardt’s conclusion.

… I don’t see how this kind of data can possibly support the wide-ranging conclusions Leonhardt draws about whether or not college is “worth it.” After all, this isn’t the outcome of a randomized trial.

Maybe everyone should buy a BMW.20140531.COCBMW2

Suppose I got someone to make a chart showing the incomes of prime-age BMW drivers versus average Americans. It would reveal a large BMW earnings premium. I could even produce a chart showing that the children of BMW drivers grow up to earn more than the average American. But that wouldn’t be evidence that BMWs cause high wages, and that the BMW Earnings Premiums extends across multiple generations. It would be evidence that high-income people buy expensive cars and that there’s intergenerational transmission of socioeconomic status.

To understand whether college is “worth it” — or, more precisely, which colleges are worth it to which students — we would need some much more fine-grained data. How do college graduates fare in the labor market compared to people who were otherwise similar at age 18 in terms of SAT scores, non-cognitive skills, parental socioeconomic status, etc?

Yglesias sees a need for better apples-to-apples comparisons.

Ben Casselman points out that you have to graduate to reap the benefits of going to college.

But just because people who graduate from college are better off doesn’t necessarily mean that going to college is a good decision. Most of the benefits of college come from graduating, not enrolling. Indeed, as Leonhardt pointed out, the wage premium for people with some college but no degree has been stagnant, even as debt levels have been rising. That means that people who start college but drop out may be worse off than people who never enrolled in the first place. Any attempt to answer the “Is college worth it?” question, therefore, has to grapple with not only the value of a degree, but the likelihood of obtaining one.

For many students, the odds aren’t good. Less than 60 percent of full-time students who are enrolled in college for the first time graduate within six years. Part-time students have an even lower completion rate, as do racial minorities and older and low-income students. For some groups, the six-year graduation rate is well under 20 percent. The vast majority of Americans from advantaged backgrounds enroll in college, so the students struggling with the “Should I or shouldn’t I?” question are disproportionately members of groups with low graduation rates.

Marginal students in particular may not find that going to college is clearly a superior choice, according to the Center for Economic and Policy Research.

Leonhardt’s analysis ignores the dispersion in pay among college grads, especially among men. Research by my colleague John Schmitt and Heather Boushey shows that near one in five recent male college grads earned less than the average high school grad. This implies that going to college implies substantial risks, especially since attending college is likely to lead to substantial debt. There is also a risk that a student will not complete college, which is especially likely for the marginal college student (a person at the edge of deciding whether to try college or not). It is also likely that the marginal college student faces a much higher risk of being in this bottom fifth than the typical college student. In short, a little deeper analysis indicates that the decision of many people, especially young men, not to attend college could seem very rational.

Bryan Caplan reminds us that the college premium must be deconstructed to determine its value for a particular individual who plans to pursue a particular field of study.

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Matthew Yglesias, “College graduates earn more, but that doesn’t prove college is worth it”, Vox, May 27, 2014.

Ben Casselman, “Is College Worth It? It Depends on Whether You Graduate”, FiveThirtyEight, May 27, 2014.

April 18, 2013

Is this the ‘definitive guide’ to the college grad job market?

by Grace

Jordan Weissmann wants to set us straight about the job market for college graduates.  He thinks the press has been overly pessimistic about the value of a college degree, and he offers a “definitive guide” summarized in five points.

(1) They’re Better Off Than High School Grads … 

(2) … But They’re Still Hurting

(3) Underemployment Has Grown…

(4) … But by Less Than You Think

(5) Don’t Worry About College; Worry About the Economy

Conflicting data
The supporting details can be read in the linked article, with dueling data sometimes making the case for valid arguments on either side of the optimistic/pessimistic divide. Weissmann refers to several data sources, and all have their limitations and are subject to interpretation.  (For example, the unemployment rates for recent college graduates vary significantly depending on source and method of measuring.)

Very importantly, career prospects vary according to individual circumstances because the college premium depends on factors like college major, ability bias, and reputation of college.  And Weissmann’s last point may be the most instrumental in affecting the college graduate job market.  A booming economy makes every college degree more valuable.  Prosperity covers all sorts of sins, and helps win elections.  Remember this?

It’s the economy, stupid.

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