At Big Think Ross Pomeroy reports on another study of the monetary value of a college education. Here are the results:
Zhang and his co-authors also pored through 2009–2021 data from the U.S. Census Bureau’s American Community Survey. Specifically, they compared the incomes of 2.9 million individuals with college bachelor’s degrees, ages 18 to 65, to the incomes of 2.9 million individuals with only high school diplomas.
“The earnings gap between college and high school graduates is around $14,000 annually,” Zhang told Big Think. “This gap is initially lower, then increases to about $20,000, and slightly decreases as they near retirement.”
Knowing the cost of attending a four-year university and the considerable income bump that comes with it, the researchers were then able to calculate the value of a college degree. They found that investment in a college education yields a return of about 9.1% for men and 9.9% for women. The higher rate for women is because female high school graduates earn far less than males. Over a 40-year career, these rates of return translate into millions of dollars of extra income.
While prepared to believe that graduating from college provides monetary value, I wish the article provided more information about the study. Unfortunately, the study itself appears to be restricted. Among my questions are:
- Did they calculate total income net of the cost of attending college? Or did they just compare incomes?
- Did they consider the extra years of income for those not attending college?
- Did they exclude individuals who went on after obtaining a four year college degree to attend medical school? A top law school? Get an MBA from a top school?
There are others.
This
Together, they estimated the total cost of attending a four-year college, using data from 1,160 public, 480 private nonprofit, and 230 for-profit institutions. Grant awards, tuition and fees, books and supplies, room and board, transportation, and opportunity costs from not working were accounted for in the tabulations. This brought the overall cost of college to roughly $140,000, Zhang told Big Think in an email.
makes me think they did consider the first two in their study but I’m not sure.
Any of those issues could render the study meaningless or at best change the results drastically.
Early in my career my college degree got me very little if anything and my having graduated from an elite school got me literally nothing. Bizarrely, no one cared about my post-graduate degree until recently.
Sounds about correct. There are a number of analysts who look at eh costs and benefits including everything you mention plus adding in other costs like the value of now now vs future. They all show a fairly hefty rate of return.
Steve
I think the authors have fallen into a logical fallacy in their study — they didn’t differentiate whether post secondary education as a value add was the source of the difference or if the income difference was due to post secondary institutions selecting people who naturally would have a higher income.
To elaborate; to successfully complete post secondary education requires 3 skill sets; intelligence (IQ roughly > 100), some amount of drive to voluntarily study for 4 years, and resistance to bad habits like substance abuse.
If you stipulate that each of those qualities is correlated with higher incomes; then the population with all 3 qualities (those with degrees) would be expected to have higher incomes then a population without such a filter (those who didn’t attend college).
Now I will point out an example and a more study method which would be much more powerful.
In the technology industry — 2 of the highest incomes generated were Bill Gates, and Mark Zuckerberg. They were also different in that they were college dropouts; of Harvard. What was common is they are both intelligent (IQ > 140); and extremely ambitious. A case can be made they selected Harvard because they were intelligent and ambitious; those qualities were the source of their success; and Harvard education wasn’t, since they both chose to dropout yet succeeded.
A better study is to compare incomes of a matched population; where the IQ’s and substance use of those who attended and didn’t attend post secondary education are equalized.
All three of your dot points are correct. So where are we?
People succeed on their own, with (IMHO) three attributes: 1) connections, 2) perseverance and 3) a combination of purely intellectual smarts and (intuitive) street smarts. In my own experience (read: me, and so many others I have known. Don’t underestimate that amorphous thing called intuition. Its a highly underrated aspect of intelligence. Perhaps decisive. )
I think you discount your degree at your peril. Yes, you are an outlier. But you were exposed to people and ideas not available at Western Illinois. I know I have recognized and taken advantage of those exposures over the life of my schooling and professional career. People smarter than me, smarter than you. I have benefitted from them, just as I have from participating in this blog.
So, where are we. Give me an entrepreneur first. Then give me brains and intuition. Perserverance. And scars. Then give me a businessman.
Now I’m ready to talk investment.