New York Fed Endorses Credential Fraud

Yes, I’m lying, but the New York Fed’s promised analysis of five-year and six-year college degrees calls the college premium into question, not that the authors understand why. They calculate that adding a fifth or even a sixth year of college costs workers ~$65,000 or ~$130,000 over their lifetimes, respectively. Thus, I wonder, “Why not graduate in just three years then to get on that wage-premium track earlier?” Maybe people could do it in two, or one, or just say they went to college even if they didn’t. It reminds me of the “seven-minute abs” scene from There’s Something About Mary, which for some reason YouTube doesn’t have a clean copy of. Feel free to explore on your own, but if you disagree with the zero-year bachelor’s degree, then you’re dreaming about Gorgonzola cheese when it’s clearly Bree time, baby.

The lesson is: Never reason from a college premium, which apparently even college graduates can’t figure out.

The more entertaining adventure is the New York Fed’s subsequent post in which it dares to question if a world outside the average college graduate exists. It’s titled, “College May Not Pay Off for Everyone.” Heretical, I know.

Here’s the authors’ chart, which unlike any research I’ve been able to do, goes back to the 1970s.

I guess The Graduate was art imitating life after all…

I’ve just received word that the authors’ security clearance has been revoked.

Don’t worry, though, they hedged themselves:

While we can’t be sure that the wages of this group wouldn’t have been lower if they had never gone to college, this pattern strongly suggests that the economic benefit of a college education is relatively small for at least a quarter of those graduating with a bachelor’s degree.

Yeah, in college-premium land it’s obvious that those grads are so stupid that if they hadn’t gone to college they would’ve been unemployed—and if they hadn’t finished high school, they would’ve sold themselves into slavery.

The obvious thing to ask is what kind of occupations these workers are in. If they aren’t in positions that require much college education, then that might imply that too many people go to college, that many college grads in highish-paying jobs benefit more from the signal their degree sends than the human capital developed through coursework, that the public is filled with endless garbage about the need for more college graduates (often at the behest of student lenders), and that a lot of these low-earners who have significant student loan debts will be unable to repay them, possibly culminating in a government write-down in the future.

Or they could just be really stupid and college qualifies them to be retail salespersons. And you shouldn’t worry, all those stories are just scaremongering and you should trust your east-coast media elite.



  1. Under the “human capital” theory it makes no sense that those who take 5-6 years to earn a degree should earn substantially less over time than those who earned it in 4. They should still have the same skills and knowledge right?

    Okay so maybe they are just a bit less talented and motivated, so are less able to take advantage of those skills? This would be a factor in some cases. However the main reason may be that their credential is perceived as being lower value by employers. It signals to employers that they are less desirable.

    Employers don’t care what the reasons are – when they are swamped with resumes they need some method to winnow down the list of applicants, and automatically rejecting anyone who has taken 6 years instead of 4 to get a degree is as good as any.

    1. Under human capital, “late” graduates should have more skills and knowledge than four-year grads, so they should be more productive and hence earn more. This is the self-evident contradiction in the Fed authors’ posts. If the number of years matters, as they think they believe, then staying in school until you’re 64 should result in one year of multimillion-dollar earnings. (Seriously, human capital waves away diminishing marginal returns to education.) If the number of years doesn’t matter, and we’re just talking about the milestone of obtaining the degree, which the authors argue in this post, then you’re plausibly correct. The problem is, the authors can’t hold both hypotheses to be true simultaneously.

      Or maybe that’s why they’re paid the big bucks to work a block away from Wall Street.

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