<p>Most students and parents at CC have little doubt about the value of a college education. Just in case, though, new census</a> data show that college grads earn an average of $51k per year vs less than $28k per year for HS grads. This disparity seems to reflect shrinking options for high-wage work without a degree.</p>
<p>Holders of advanced degrees, on average, earn half again as much as those who stop at the bachelors degree level.</p>
<p>So, if anyone is getting the "why college?" question, this new Census Bureau report provides the financial data to reply.</p>
<p>But does this take into account that most people who get college degrees come from families that are wealthier to begin with than people who don't? There is surely a parental wealth effect that leads to wealth in the next generation, but what statistical work has been done here to show that there is a college degree effect independent of family wealth? </p>
<p>Indeed, economists of education (e.g., Mark Blaug, one of the inventors of "human capital" theory) have shown that as a broad national policy, it does more to promote economic growth to have the masses get good primary education (as is done in east Asia) than to have the elites get university educations at public expense (as was done in post-colonial African countries). The year my wife was born, Zambia was wealthier than Taiwan. Today Taiwan is wealthier than several European Union countries, because the national policy favored broad public investment in primary education, while much of higher education is paid for by families individually. </p>
<p>Bill Gates is one example to test this hypothesis. He dropped out of college. He could afford to drop out of college and start a business, because he had a million dollars from his grandfather from the day he was born.</p>
<p>While there are some college students that are wealthy, there are plenty that aren't! I could not go to college without financial aid, and once I get out I'll be in debt for years! High school grads actually have an advantage there, so census data is probably pretty accurate in that aspect.</p>
<p>The whole thing of people who go to college generally coming from wealthier families is not necessarily true. With financial aid these days, anyone can go to college.</p>
<p>Yes, it is neccessarily true. People from wealthier families are more likely to go to college <em>period</em>. The fact that its more affordable for poor families today than 30 years ago is irrelevent, as these people are less likely to go to college to begin with.</p>
<p>the problem with studies like the one given is that correlation does not imply causation. The consumption of Pepsi is probably highly correlated with the number of students in college, but the way to get more students in college is not to drop the price of Pepsi. Both are caused, I would bet, by a growing population.</p>
<p>I don't doubt that there is causation between college and earnings; many higher-paying jobs require college degrees for one thing. But studies like the one reported have gaping holes when they try to imply such causality. </p>
<p>Maybe those with more potential/ability choose college. Maybe a college education is just a screener for ability since you have to get it and pass the classes to get a diploma. The upshot is that a college degree may be a signal to employers. The hidden variable behind both getting a degree and higher income is ability. If we decide to corrupt the signal by getting having more kids earn a degree the extra return to a college education may fall or vanish. </p>
<p>Lest you scoff at this view of college as a signal, its worth pointing out that its a subject of continued research in economics. Michael Spence is a co-winner of the Nobel Prize in Economics (2001) and the paper behind his prize examines a college degree as just such a signal to employers.</p>
<p>For most professions, post-HS ed is a must. This is not to say that intelligent motivated individuals could not make a great deal of money as bricklayers, plumbers, starting a service business, inventing a Pet Rock, so on and so forth. But it is very difficult to land a decent job with potential for advancement at an engineering firm, consulting firm, etc. without a college degree.</p>
<p>Seems to me that the stats quoted are addressing the total population, which would not illuminate the occasional exceptions.</p>
<p>Don't forget that there are a number of low paying professions that require college degrees..teachers earn considerably less than 50,000 in most states especially if they have less than ten years of experience.</p>
<p>A non scientific study of who I know and who appears to make the most indicates that college does pay off especially for students who come from poverty.</p>
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So people from wealthier families are more likely to take advanced degrees?
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</p>
<p>Unquestionably. Economists have studied this issue quite a bit. Indeed, psychologists have studied this issue from the other end: the National Longitudinal Study of Youth data set includes data on a large number of young who have been surveyed over two decades. There is IQ data for each individual in the study, and parental income data and other wealth data for each individual too. For study participants equal in IQ, the likelihood of attending college is NINE TIMES higher in the high-income range of incomes at that IQ level than in the low-income range. Colleges do not always equalize opportunity for the poor and able. Professional schools further sort people by parental income in disregard of applicant ability to study.</p>
<p>You can speculate all you want as to cause and effect, but the data still tells me that if you want a better paying JOB you should go to college. A brilliant person that wants to start his own business may not need a degree, but if employers require a degree you need a degree. The phrase, "getting your ticket punched" has been around a long time.</p>
<p>I wonder if a stronger correlation could be shown for those who took the initiative to develop a skill - going to college being one way to do so. However, my guess is that if you looked at those who did not go to college but did develop a special skill (e.g., plumber, electrician, auto mechanic, etc.) that their average income would equal if not exceed the average salary of those who go to college. (I agree, that $51K is not that high of an average salary - hence not too difficult to achieve with a skill in the trades.)</p>
<p>"Lest you scoff at this view of college as a signal, its worth pointing out that its a subject of continued research in economics. Michael Spence is a co-winner of the Nobel Prize in Economics (2001) and the paper behind his prize examines a college degree as just such a signal to employers."</p>
<p>I well remember discussing this in Bus School at U. Chicago over 20 years ago. Then, the discussion was why the wage premium for MBA holders. Their conclusion was similar, with the further argument that companies have, to some degree, outsourced employee selection to the admissions offices at Bus Schools. Interesting thoughts.</p>
<p>To those arguing about the census data, relax. While Roger's interpretation may be a bit logically flawed, the correlation is interesting, as others have pointed out. And, if one buys the signalling hypothesis, then one ups one's value by joining the potentially high wage cohort, cause and effect or not - view it as scamming the signalling, if you want.</p>
<p>Yeah, in other threads I have frequently expressed the opinion that it is a good idea for young people with certain career goals to get into college, the more prestigious the better, and that is because I have read that economics literature about signaling fitness for employment too. It is dubious whether college provides enough added value IN ITSELF to justify its huge cost, because self-motivated learners can learn most of what is taught in most colleges, although they do not get a credential by doing so. But being admitted to and earning a degree at an elite college signals big-time that the college graduate is a competitor, a savvy person, and a person not afraid of tough challenges. Being able to send that signal in the job market may indeed be worth a fair chunk of change, but that wouldn't be true of all colleges equally.</p>
<p>Even if college is mainly a signal it does not negate the advice Roger Dooley gives; tell kids to get that signal, and (as tokenadult writes) make it the best signal you can. After all mimicry is widely practiced in nature. And when NJres talks about "getting your ticket punched" that is exactly what signalling means. Now I personally believe that college teaches you something of value, both personally and in employable skills. </p>
<p>The problem with resulting policies such as "college for everyone" is that what is true for one person or a group is not necessarily true for society as a whole. And studies such as the one cited are used not only to guide individuals but also to justify how society spends its resources.</p>
<p>Is it really true that sending more people to college will raise all their incomes and that of society? I'll bet this study will soon be used in support of just that point, but this study does not actually prove it is true. As tokenadult pointed out, it may be preferable to improve the primary education available so we don't have inner-city HS's that dump ill-prepared kids out (and those are the ones staying long enough to get the diploma). Just recently the news reported the abysmal graduation record for minorities of the school districts in large cities. Maybe our resources are better spent first improving basic education rather than expanding college enrollment. And to the extent college is a signal, if we give more kids the ability to send that signal, college enrollments will rise too. Its win-win :-)</p>
<p>Just because there are significant outside causes doesn't mean that a college degree doesn't help someone out. I agree that it's not completely the piece of paper that makes one successful, but to discount this factor is as incorrect as attributing all of ones success to it.</p>
<p>One key factor is that there used to be a lot of high-wage jobs, mostly manufacturing, that provided a high wage path for those without degrees. An autoworker, for example, could earn lots more than degreed teachers, maybe even engineers, in a year with strong overtime.</p>
<p>Some of these jobs still exist, but the global economy tends to allocate these manufacturing jobs to countries with more modest wage scales. Those high wage jobs weren't created by scarce skills and market supply & demand, but rather by union/management agreement; this made these jobs vulnerable. The choice these days is tending to be college vs. Wal Mart instead of college vs. the Chevy plant.</p>
<p>Companies technically can't require a degree if it's not really needed for a job due to potential "adverse impact" laws, but in reality requiring a degree is a handy initial screen to find employees who have some ability to stick to a multi-year effort and successfully complete it.</p>
<p>One trend that this study overlooks: some high-wage jobs that require certifications rather than degrees, like Cisco and Microsoft certifications. Some of these are quite rigorous, and qualify the individual for moderately lucrative careers. Other special skills training programs fall into this category as well.</p>