Day: 2013/12/09

College Pays (Some Restrictions Apply, Void Where Prohibited)

Nancy Folbre of the TimesEconomix blog leads us to the College Board’s most recent exercise in post hoc ergo propter hoc human capital reasoning, “College Pays” (PDF). Its most insightful figure, 1.6, is on page 16: “Median Earnings (in 2011 Dollars) of Full-Time Year-Round Workers Ages 25-34, by Gender and Education Level, 1971-2011.”

Figure 1.6

Using median earnings and the 25-34 bracket are good moves. Full-time, year-round workers, however is a little dubious, though that’s the only consistent source the College Board had for 1971-1993 (Condition of Education 2004a, Supplemental Table 14-1), so I don’t mind it so much.

What I do mind, though, is the median-to-median comparisons because they hide college-educated workers who earn less than the median high-school graduate. Presumably college wasn’t that great an investment for them. On the other hand, I like the percentile-to-percentile comparisons found in Figure 1.5, which shows earnings ranges for all full-time, year-round workers ages 25 and up, except it’s not the more relevant 25-34-year-old bracket that the College Board used in Figure 1.6. Our loss.

Figure 1.5

For the record, at least 20 percent of 25-34-year-old college graduates who had any earnings (not just full-time, year-round workers) earned less than the median high school graduate the same age. Also, the Census Bureau omits people who earn nothing, which these days is about 12 percent of all college graduates and a quarter of all high-school graduates.

Percent Range College Grads Earning Less Than HS (25 - 34) Percent 25-34 With Zero Earnings

(Source: PINC 03, author’s calculations and did he mention that student loan debt has gone up?)

As always, the College Board’s actual findings are college pays off, if it pays off, when it pays off.


To editorialize on Folbre’s response, she correctly points out that the median college graduate today earns less than in 2000, to say nothing of 1971, and she notes that in fact many college graduates are simply displacing high-school graduates in the job market. Her metaphor is very similar to what I had in my mind:

Many college graduates are simply displacing less-educated workers from the jobs they once held, scrambling up the attic stairs to the roof of a bungalow whose first floor, inhabited by mere high school graduates, is now largely underwater.

I’d characterize it as people clinging to a ladders that’re sinking into the ocean, and the energy spent jumping from the “high school” ladder to the “college” ladder just to remain at the same altitude equals the rents transferred to universities.

Although Folbre isn’t a cheerleader like the College Board, her explanation for poor college payoffs is a bit iffy. To her, U.S. college-educated workers were hit with a supply shock of similar college-educated workers overseas, e.g. China quintupling the number of bachelor’s degrees it was conferring between 1999 and 2005. As the charts above show, however, plenty of college-educated workers haven’t been doing well for a while, which raises questions about the human capital hypothesis.

Trade doesn’t explain why 20 percent of high-school graduates between 25 and 34 have been in zero-earnings territory since the dot-com bust, much less 25 percent now. That’s obviously a lack of demand in the economy that’s best explained by the trade deficit rather than trade itself. Our trading partners are job-destroying neo-mercantilists, not comparative-advantage Ricardians.

Folbre also isn’t willing (in this post at least) to acknowledge other U.S. underconsumptionist policies of rewarding unearned incomes while taxing earnings, which is another monster problem that keeps workers chronically underemployed regardless of their education.

“College Pays, Sort Of” Indeed.