CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press The Data Show the Case for College Is More Ambiguous than What the New York Times Tells You

The Data Show the Case for College Is More Ambiguous than What the New York Times Tells You

Tuesday, 27 May 2014 04:09

David Leonhardt touts (but doesn't link to) new research from the Economic Policy Institute which shows the wage premium for recent college grads hit a record high in 2013. He then goes on to declare that it would be irrational for people not to go to college given this large pay premium. 

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. 

Leonhardt also tells readers that the unemployment rate for people with just college degrees (i.e. without advanced degrees) between the ages of 25-34 was just 3.0 percent in April. That seems unlikely. The Bureau of Labor Statistics reported that the unemployment rate for all people over age 25 with college degrees, including those with advanced degrees, was 3.3 percent in April. Since younger grads and those without advanced degrees have higher unemployment rates it is difficult to see how Leonhardt's assertion can be true. 

Comments (8)Add Comment
written by djb, May 27, 2014 6:04

There is no inadequate aggregate demand.....

Just people too lazy to go to college
If College is Free, Why is So Much of It Consumed at High Prices?
written by Last Mover, May 27, 2014 6:17
The much-discussed cost of college doesn’t change this fact. According to a paper by Mr. Autor published Thursday in the journal Science, the true cost of a college degree is about negative $500,000. That’s right: Over the long run, college is cheaper than free. Not going to college will cost you about half a million dollars.

According to the logic of this baseline, college is free because its net cost over time is less than the cost incurred up front for going to college.

That's like saying a fuel efficient car is free because it pays for itself over the life of the car.

In light of exploding up front college cost combined with degrees today worth that of high school degrees in the past, the question is why the differential value of a college degree commands so much demand value.

The reason is college has become the key institution to provide socialized skills over specialized skills at very high cost, given the breakdown of public institutions that used to accomplish this.

True, MIT engineers are better than most engineers, but degreed engineers in general have credentialed social skills that get them through doors not available to high schoolers who may be as proficient on the same job, and even earn more than their counterparts in general beyond engineering.

Colleges have morphed into a filtering system that allocates artifically scarce slots at higher income levels to the haves over the have nots.

But colleges cannot be portrayed as such, because that would be class warfare and as any economist knows, class warfare does not exist in America.
Control for family background?
written by Ralph Musgrave, May 27, 2014 10:15

People from stable middle class backgrounds tend to earn more than others even when they don't go to college. Thus higher earnings of graduates is partially explained by family background. Half the studies done into the effect of college education fail to control for family background, thus such studies are not worth the paper they are printed on. I always word search for "family" "family background" "control for" in such studies and ignore them if those words / phrases don't appear.

Still, conducting those studies keeps numerous highly qualified idiots employed.
written by PeonInChief, May 27, 2014 11:45
One of the things I always ask myself when I see a bunch of articles on the same subject is "why this? why now?" Two reasons. The first is that, now that young people are coming out of college with mortgage-sized debt, it's more difficult to justify spending the money if you're looking only at the increased income. (We'll leave aside the issue of class, as working class students have to borrow more money and don't have the social networks to get a job that will pay off the debt in less than a lifetime.) Second the middle class has argued for nigh on forty years that the low incomes of the working class are justified by their lack of proper virtue and moral rectitude, rather than forced competition or lousy laws or other things entirely outside their control. They're doing what many people do in the same situation--doubling down.
written by Kat, May 27, 2014 12:06
Control for family background?
written by Ralph Musgrave, May 27, 2014 10:15

Haven't seen one study yet in the NYT that does this.
PeonInChief asks the right questions.
written by jaaaaayceeeee, May 27, 2014 12:31

The actual study (this) doesn't say what they want (now).

Note the difference in EPI charts which Leonhardt doesn't link to. Check declining real wages graph in EPI blog post which also containins solutions that Leonhardt ignores. Actual study (check out chart N) is first link in this blog post: http://www.epi.org/blog/wage-s...s-senator/

Leonhardt writes very well, but to obsfucate the data in the actual study and solutions in the EPI blog post (and others like alternative pathways to workforce including German-style apprentices).
worse is the regressive nature of college...
written by pete, May 27, 2014 2:46
Unless you believe in some trickle-down from the college educated to the non-college educated, it seems outright outrageous based on these findings for those not going to college (most people) to subsidize the college bound, which is the current status. Bizzaro world where that is the cry, that we need cheaper college education, while some folks estimate a college NPV of $500,000.
Maybe it is the credential, not the actual education that matters?
written by John Wright, May 27, 2014 9:49
In the NY Times article, two graphs are shown, one titled "People with some college" and "Graduates of 4-yr college".

The people with some college are at about 1.1 on the scale, while the 4 year graduates are 1.8.

The ratio is compared to those with only high school.

It would be interesting to see the distribution of the earnings of "People with some college" broken down by years of college. For example, how does someone with 3.5 years of college do compared to a 4 year graduate?
If employers are paying for "education", one could argue a 3.5 year college student with similar coursework and grades has about as much education as a similar 4 year graduate, so their pay would be similar and perhaps converge after a few years on the job.

If the 4 year graduate makes far more than the 3.5year student, then one could argue a high premium is placed on the credential over actual course work/education.

And one could argue that continuous education ("on the job training") is really the primary education most people receive in life, given a 4 x 9 months = 3 year college training period and a possible 40-45 year career.

If the college degree is so significant, is this evidence that US employers are systematically unable to identify talented, non-college degreed employees and train them for better paid jobs?

Perhaps it is simply a credential bias promoted by the government and the education industry?

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.