I have a degree from a no-name university in New Zealand. I'd do it again for a few pragmatic reasons.
1: Lots of companies will reject you on sight without a degree. I don't think it's a good thing, but it is reality.
2: With a degree your ability to move overseas dramatically improves. I moved to America after graduating. I flat out couldn't have done that without a degree. Points based systems immigration systems like New Zealand have dramatic bonuses for people with degrees.
3: You don't have to jump through the hoops and explain why you don't have a degree all the time. Stupid reason I know, but it's something I've seen friends without degrees have to do constantly - and not just in career situations. As I mentioned, I went to a no-name university. If you live in NZ, you'll know it. If you're an American, chances are, you've never heard of it. But because I have a degree, it doesn't ever really come up.
4: The cost isn't that bad, when you spread it out over a career. My degree & living costs cost about $60k NZD (~$40k USD). That's $1k USD / year, or $.50 per hour. Considering how my income has multiplied in the few years since I've graduated (SF wages help tremendously here), the actual cost is barely anything, even when you control for the opportunity cost of studying.
Where I think College returns make a lot less sense
• Paying out of state tuition for lifestyle reasons, when you're going into a relatively low paid field afterwards (e.g. teaching).
• Paying private school tuition at a school without a strong reputation
You didn't go to uni in the USA and the paper is by the St Louis Fed on USA grads.
You took your degree in a country with far lower inequality and better inward education investment, and then jumped over to work in a country that doesn't tax people enough to support USA students.
I went to university in a country with a Gini coefficient of .35, and now live in a country with a Gini coefficient of .39 (See OECD link below)
The funny thing is, my student loan is one of the highest out of my American friend group† (although very normal amongst my NZ peers). Unlike the US, there was a lot less much in the way of financial aid/scholarships available, so sticker price was what people actually paid.
$29k is not that much is it? That is about what I ended up with for my degree in Sweden where higher education is free but you borrow for living expenses. I repay it with about $100 per month for 25 years.
Perhaps the biggest difference is the interest rate which is government backed and around maybe 1-2%. According to first result on Google the interest rates on US student loans seems to be around 6-8%.
$29k is a decent chunk of change of you don't have a high paying job. It'll take you many years to pay off because of all your other expenses (housing, transportation, healthcare, food, clothing, etc.).
Yes, but think of it as someone else lent you money to be housed, fed, and clothed for four years while you earned no income. That’s going to cost money anywhere in the world, before a single book is purchased or lecture paid for.
There's fairly decent financial aid available to cover your living costs if you're from a low income family, but that cuts off pretty quickly, and unlike the US, there isn't really a culture of paying for your children's education, so there's a lot of kids (like me) who grew up upper-middle class but didn't get much help through university.
Overall, I'd equate the USD = NZD as realtively equivalent, even though there is a currency difference. The average American is graduating into a job paying $51k USD, whereas NZ grads are often starting at $50-55k NZD.
Oh yeah, it's a great deal for me. What I meant was Americans who studied and then work in America end up paying roughly the same (when you take into account average earnings) as Kiwis who study and then stay in NZ.
You are incorrect about your assessment of US education expenditure. Governments in the US spend a similar percentage of GDP on tertiary education as New Zealand: https://jobmarketmonitor.com/2016/09/23/tertiary-education-c.... Both spend in the 4-5% range of GDP in terms of public money. (We spend a higher percentage of GDP, again just public money, than countries with “free” education like Germany.) Additionally, because US GDP per capita is 65% higher than New Zealand adjusted for cost of living, we spend far more than New Zealand per person in absolute terms.
Moving overseas is the top benefit of having a relevant (not just any) degree IMO. I'm grateful that American cities are still the best places in the world to work as a software engineer, but that could always change. I'm hoping a non-STEM degree combined with 6+ years of experience will still let me move around easily.
For knowledge workers who could have begun a similar career without college, the cost of the degree should also include the money they would have made by working 4 additional years at the end of their career (probably one of the highest points?)
The Opportunity Cost would have been incurred while they were in college, not 30+ years after. There are too many variables in play when projecting that far out in the future, but you can make good estimates as to what would have happened in the past as an alternative to the 4 years spent in college.
I've done the math on the opportunity cost of how much I would have made if I hadn't gone to university. It was about $120k over 4 years, and raised the opportunity cost to about $160k (I borrowed $60k, but some of that money was for living expenses, that would have been covered by working full time). I was earning about $16/$17 per hour at the time. It increased the jump I needed to make from $.50 per hour to $2 per hour.
Alright. I probably would have taken a similar job to the one I actually took 3 years earlier and followed a similar career path the whole time. That is, I wouldn't add 3 additional years of entry level IC work, I would add 3 additional years of senior IC work or better. Right now I'm working for half of prevailing wages for senior ICs in exchange for living in a civilized country, so half of prevailing wages * 3 years - taxes is around $400,000. If I ever move back to the US or get promoted it will be pretty easy to get to an opportunity cost of seven figures of post-tax money for 3 years of math degree.
Grad school is often much better for immigration scoring than a bachelors. Especially if you can manage to do the graduate degree in the country you want to immigrate to.
I'd say this is spot on, particularly the part about going to college for lifestyle reasons, combined with a field that is low-paying, and a choice of uni that isn't particularly cheap, is a bad combination.
I'm not sure I agree on grad school, perhaps you could elaborate? It's true that it's very much hit or miss. But my experience is that there's plenty of grad schools which offer 1 - 1.5 year Masters' and tuition fees that aren't abnormal. Here too your second point rings true, either you pay a lot of money for a good rep (e.g. if you go into BigLaw, assuming you don't burn out, it gives a high return rate), or you pay little for a no-name university, and then I feel grad school absolutely does come at a premium. Compared to a 3-4 year Bachelor's degree, it's usually a relatively quick program with potentially bigger upside, especially if paid for by your employer.
I think what most students underestimate is just how many of them fail to finish the standard path. Almost half of students don't finish their bachelor's within six years due to delays and changing paths, and a lot of them quit entirely. I think college makes sense if you know what you're looking to study, why, are dedicated to completing it, and able to.
A lot of students go into fields of study as a teenager, literally never having had a 5 minute conversation with a person actually working in the field, having spent no time looking at the income tables, or indeed not actually considering the field at all, but just wanting to become a college student. It's these students who probably drag down the stats quite a lot. I've seen fairly unimpressive people go into a business course, work their ass off, do various internships, and land high-paying jobs. And I've seen smart kids start the same business course, muck around, graduate after 6-7 years and land a mediocre job that doesn't really require any particular degree. At the end of the day the student is still the most important factor here, and by the time they head to college, it's often already 'too late' for institutions to turn an B student into an A student, without the intrinsic motivation. There's lots more room in primary/secondary school for that, that's really where it's at. What college you head to after is less important in my opinion.
Rolling deep into anecdotal avenue, but my thoughts on grad school
• Lucrative fields like medicine & dentistry saddle you with enormous debts (often in the mid six figures) that take multiple years to pay off. The ROI is probably worth it if you work to 65, but you're locked in for easily twenty years, and such high debt levels make taking risks very difficult.
• Lucrative, but more populated fields like law & business also often saddle you with enormous debt, and for these degrees you need a school with a strong brand name to get a look in anywhere (if you do an MBA and you aren't at Harvard/Stanford/Wharton, and a very few others, what's the point?).
• In a lot of fields (liberal arts/social sciences) what's the point of getting a masters? Do you get an earning premium? Is the earning premium worth the opportunity cost? I'd be surprised if the answer is often yes. I have a friend who was a teacher and is now studying to be a families therapist. Lovely person, but absolutely terrible choice. Years of additional study and debt, and no hope of a future earning substantially more money to show for it all.
I agree completely with your points about teenagers not doing enough due diligence before they study.
Agree with most of this comment (couldn't read article due to blocking or something). Can confirm the blacklist on no degree. I had one that had like 10 years experience in and perfect fit. When HR found out that he did not finish his degree it was over with no recourse.
Also Masters (MBA is different) is useless in most fields unless used to get a visa or something. Usually you are foregoing wages with few additional benefits. Might be slightly easier to get first job.
Not sure source of degree matters as long as accredited. Certainly there can be upside like same alma mater but I rarely care but will admit to negative bias to Univ of Phoenix but interview and work history trump everything.
Having said that BS or BE have merit if the student actually takes it seriously. I learned a whole lot that I'm not sure I would have learned through self study alone (a least around that time).
You can look at it as a positive too. Having no degree as a programmer means that overly bureaucratic workplaces are filtered out and your chances of ending up at a workplace that has a minimum of BS are increased.
Only works for programmers though. Everybody else should obviously get degrees.
Few people pursuing PhDs are doing so to maximize earning potential.
Disregarding the mental toll of a PhD (one problem being that too many people want to be paid to think than there are available positions), I totally disagree with the parent poster's claim that graduate school is a rip-off. Just being in an an academic environment, being able to take classes, & studying around really smart people and doing research at the highest academic level is a really great experience & makes the stress worth it.
> Just being in an an academic environment, being able to take classes, & studying around really smart people and doing research at the highest academic level is a really great experience & makes the stress worth it.
I guess your mileage may vary.
The best description I've heard about grad school is that it's a self induced neurosis. That was certainly my experience at the time I did it.
The argument you put forward doesn't make sense. It's not a ripoff to make close to minimum wage for a number of years (and possibly take on high levels of student loan debt), all to work in a field where there is an oversupply of labour that depresses wages?
My experience is the work in academia is more interesting and intellectually stimulating than my high paying tech jobs. That would be one motivation to go the academia route instead of the tech route.
If you come out the other end of a PhD, then you have the opportunity for best of both worlds: high paying job to work on the problems you find intellectually stimulating.
Also, it is cliche, but doing a PhD does train a person in a way to think that you don't necessarily pick up in a normal job.
Having a PhD is a bar raiser, it automatically disqualifies you from a lot of jobs that don’t have intellectually stimulating problems to work on. This is all fine and dandy if your area overlaps with a hot field, but not if it doesn’t (or is then but isn’t now). Right now, 95% of the CS industry jobs for PhDs are in AI.
The thinking advantage of a PhD is really valuable, its like an extended apprenticeship with your advisor. Also, it gives you time to look at things you find interesting (well, it should, sometimes not).
Yeah fair points. I was sick of studying by the time I graduated - I enjoyed my experience at University, but I wanted to get into the private sector (probably worth mentioning that I studied business at the undergrad level, so I think a lot of that 'postgrad research' in marketing for example is suspect at best).
I did my Ph.D. to get access to the interesting work that I wanted to do. This work was / is actually less well paid than a standard CS career (in the UK this is IT contracting in the City of London/Finance sector - rapidly £600 a day, often much more). But, if I had done that I think I would probably have had to quit after 10 years, and I would probably have ended up doing something like teaching. This would arguably have been a social good (depending on how good a teacher I might have been) but in terms of pay back I think that the fact that I've managed more than 20 years and am still going is clearly a good bet financially. The seniority that I have in the industry now means that I am able to command good remuneration and the work is as interesting as ever, but more stressful!
Even though the college premiums might be declining, I don’t think your logic is supported by this article at all. The stats in this article show postgraduate degree holders earning 3x what non-graduates earn, and accumulating 5-10x the wealth.
>4: The cost isn't that bad, when you spread it out over a career. My degree & living costs cost about $60k NZD (~$40k USD). That's $1k USD / year, or $.50 per hour. Considering how my income has multiplied in the few years since I've graduated (SF wages help tremendously here), the actual cost is barely anything, even when you control for the opportunity cost of studying.
You also need to take into account the opportunity cost. You could have been working at the time, earning $XXk/year.
Yep, I was giving up about $30k a year ($120k / 4 years). I was working in a supermarket. $2 more an hour needed over the course of my career to make the juice worth the squeeze. Nothing to write home about.
What you are portraing is your exploitation of your countries education system for your own benefit. The NZ tax payer invested in yours for your future ROI into NZ and you put this ROI in your sack.
> Using a new administrative dataset combining the universe of permanent migrant departures from the Philippines with the universe of institution-level post-secondary enrollment and graduation, we show that enrollment and graduation in nursing programs increased in response to demand from abroad for nurses. The supply of nursing programs increased to accommodate this. The increase in nursing enrollment and graduation during the period was much larger than the increase in nurse migration and contributed to a brain gain
This is a really interesting addition to the literature if you dig through it, with subtle distinctions between income gains and wealth gains and interactions with demographics.
It's not a simple "college ain't what it used to be" story. The biggest puzzle is how to explain why recent grads still command significantly higher incomes than nongrads without accumulating significantly more wealth.
Increasing tuition is a factor, as is the declining return on capital gains over successive generations. Limited financial literacy and predatory lending seem to be hurting recent grads too.
Most notably, the inability to discharge school debt in bankruptcy since 2005 may have had strong effects.
That last legal change remains bewildering to me. You have three parties: schools, financial institutions, and teenagers. So uneducated teenagers are expected to know whether or not their choice in school, degree, expenses, and personal background will make their education worth it? When the other parties have all the data and experience? And if it turns out everybody was wrong, the now barely-employed twenty-something is least prepared to absorb the burden. More importantly, the least susceptible to incentives to improve this endemic situation for other future students. It creates a moral hazard which drives schools to overprice courses of education that are higher risk, and removes any incentive for lenders to educate borrowers on expected returns from different choices.
Policy circles are hotly debating right now how to overhaul the entire system. Maybe we should acknowledge the policy changes that helped break everything in the first place, and reverse those as soon as possible.
The three parties are schools, teenagers, and the government. More than 90% of existing student loans, and nearly all new loans, are issued by the government.
The student loan system will cost the government $170 billion in losses over 10 years, because interest doesn’t cover money written off due to hardships and loan forgiveness. The non-dischargability of student loans protects the government from further losses.
Non-dischargability is a reasonable feature given the other aspect of federal student loans: they offer income-based repayment. Under Obama’s REPAYE, your loan payments are capped at 15% of your discretionary income.
> The student loan system will cost the government $170 billion in losses over 10 years
I don’t doubt this, but it’s a statement that focuses only on losses and completely ignores the economic benefits of the educated workforce.
$170 billion over ten years is on the order of 1% of education spending. Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively, the extra income taxes paid by the non-defaulting group of college graduates alone makes the loan forgiveness losses a drop in the bucket, the income makes up for the losses many times over.
Once the job market got better a couple years ago, the percentage of job postings which required a college degree dropped. In other words, the "requirement" was mostly a way of filtering, not something that actually increased productivity.
Speaking as a person with two degrees myself, I can say that non-degreed programmers seem to be just as productive as those with degrees. In fact, CS majors in particular have a problem just solving the problem in front of them, and often want to over-engineer things using the techniques and patterns they learned in school that are applicable to huge systems, whereas non-degreed programmers often just solve the actual problem they have without trying to justify (in their own minds) years spent learning other techniques.
I am not at all convinced that a college-educated workforce is more productive, for more than half the jobs in which it is required.
Productivity isn’t the metric that determines whether the government recoups student loan defaults, income is. And the income of graduates is still multiples that of non-graduates, as shown by the data in this article.
Individually, yes. But that doesn’t mean that people are making more money in the aggregate by more people going to college. If the government subsidizes college and that results in more people going to college, but employers just respond by taking previously non-college jobs and making them require college degrees, there isn’t actually more money in the economy as a result to justify the government expenditure.
You’re moving your own goal post. You complained about the government’s relatively small outputs from the student loan program, which is absolutely recouped many times over by today’s income premium, in the form of income taxes, regardless of whether the economy grows.
Your hypothetical isn’t the way things are actually playing out, so I don’t feel like it needs to be argued. Degree holders are generating value on average, so the economy does, in fact, have more money as a result of education. And the government also makes money on it’s investment in education on top of that.
I feel like you're talking past a lot of the other commenters in this thread. I'll try to frame it another way:
Generating value is synonymous with growing the economy and being more productive. You can't inflate incomes without either increasing productivity or printing money. If degree holders command higher incomes without offering higher productivity, it comes at the expense of non-degree holders earning lower wages than they would have without the degree holders around.
In my opinion, much of the income premium comes from employers using degrees as a filter (similar to a standardized test). Doing well on the SAT doesn't make you more productive, but does give you a leg up over your peers.
I totally agree that a big factor in income differences is due to cultural biases that favor degree holders. I don’t think degrees are economically zero value though, for example patents are primarily held by inventors with postgraduate degrees, and more businesses are started by degree holders.
I’m not really sure how to answer your first part, I’m not trying to talk past anyone, but I feel like people are responding to my point that the income premium is what matters to the student loan program by repeating the conclusion of the paper that the wealth premium is going to zero.
The income premium and the wealth premium in this paper are two different things, and even though people with degrees might end up having net zero additional wealth accumulation at the end of their lives, that doesn’t mean the student loan program is also net zero, or that people with and without degrees have the same lifestyle.
The student loan program gets to make it’s money back before degree holders get to save the money, so the income premium matters to the government more than the wealth premium, when figuring out whether forgiving loans is worth it or not.
Right, so the issue with the income premium without economic growth argument is that the government would have collected those incomes anyway, just from different people (unless the student loans are structured as a % of future earnings, in which case I apologize for my ignorance).
Of course, degrees aren't zero value, but the subsidies for education (student loans) could still be distorting supply in a way that results in a net loss for the government. For example, a self-taught engineer or entrepreneur spends years in school instead of inventing or starting businesses. This is a poor allocation of investment and human capital which results in a net economic loss (including a loss for the government).
Why do you believe that school years take away from invention and business? There’s no evidence of that, and a lot of evidence in the other direction. Right now, both inventing and starting businesses are strongly correlated with degrees. The evidence we have suggests not only that student loans are a very good investment, it suggests the investment is so good that the government would make almost as much money back if they subsidized education completely, if they paid for education and didn’t ask for the money back. The evidence in countries like Norway and Finland seems to back this up as well. They subsidize education, and their economies are strong, and their education systems out-rank the US globally.
So, if in the aggregate a higher percentage of people have degrees in recent decades (true), but the productivity growth per employee hasn't gone up (also true), then the economy as a whole hasn't benefited (economically, anyway) from having more people go to college.
The example of patents looks a lot more like "people with advanced degrees are more likely to be in jobs where filing for patents is encouraged by the employer" than it does like "people with advanced degrees invent more". To be honest, the fact that our current patent situation is so obviously a net negative might be skewing my judgement on this, but if you thought that bringing up patents was a way to make it sound convincing that college degrees enhance productivity, well it doesn't for me anyway. I even have a patent, or my employer got one from my work anyway, and I still think our patent system is value-destructive.
I feel like the point I’m trying to make is being repeatedly ignored in favor of the thing you want to talk about. I have not been arguing that college benefits the economy as a whole. It doesn’t take benefitting the economy as a whole for the government to make back it’s money on student loans, specifically because the government gets the first cut of the income, even before the student does. Is it clear at this point that the current income premium and the wealth premium are separate things, and that the wealth premium is the only one currently disappearing?
Maybe the government part is confusing here. Imagine student loans coming strictly from for-profit banks. It is possible for the banks to make their money back, while students lose money, right? This happens to restaurant owners and poor families all the time. It doesn’t matter if the loans stimulate the economy, or if a percentage of loans default, the bank still makes it’s money.
Anyway, I’ll play along with the other arguments, just for fun. So by what metric are you declaring that productivity is not growing per employee? The US per-capita GDP has been growing steadily. How do you back up your claim that productivity hasn’t gone up?
Even if it were true, I don’t think it’s clear or true that you can declare the economy as not having benefitted from education in the past. The paper we’re commenting on has data that shows a net positive economic value in the past, even though the wealth premium is disappearing. And BTW do you really believe that - that the education system has done zero economically? Is that what you’re implying?
People with advanced degrees do invent more, in part because people with advanced degrees are more likely to be in jobs where invention and patents are encouraged, yes. Also because people who are prone to inventing are more likely to choose to do a PhD. How does this demonstrate that people would be inventing more if they chose not to go to college? People can already choose not to go to college, and choose to invent, and by and large that is not happening - what’s really stopping all the non-degree holders from inventing right now? You’re saying it’s just jobs keeping inventors out? There’s no education requirement on submitting a patent, so if college does nothing, why aren’t high school graduates already the majority of applications?
Correlation does not equal causation. There's a very broad spectrum of people who do not have degrees. It's very likely that if you took those same people earning degrees and had them enter the workforce instead, they'd have equal or greater pay.
That data doesn't reference the point I'm making. What I'm saying is that it's very possible that if the same people that got bachelor degrees instead entered the workplace, they'd have equal or greater lifetime earnings.
To put it another way, earnings are correlated with an individual's talent and drive. Currently, many of those people end up getting degrees. It's a correlation, it's not the degrees that are causing the jump in earnings, it's the individual's skills.
You’re right, figure 3 doesn’t answer your question. But your point/topic is not addressing my original point. My point above was that income before taxes alone is what you need to evaluate whether the student loan program offsets the student loan default rate. The financial return on investment of the student loan program is determined solely by the increase in income, not the wealth premium.
However, your conclusion isn’t shared by the authors. They show a positive return on college degrees, it’s just smaller than the unadjusted difference in income.
One probable factor for this is cultural bias toward giving jobs to people with degrees, and paying employees more who have degrees. Individual skills alone do not explain the difference in earnings, so despite the fact that talent correllates with income, the correlation is not 1, and thus it is not likely that the same people earn equal or greater without a degree than with. It is likely that the same person without a degree will earn less than with a degree, on average.
That doesn't say anything about which is cause and which is effect, which is what is relevant for an increase in college education to make a more productive workforce.
In fact, the labor productivity growth rate does not seem to have significantly changed at all, even as the percentage which is college educated has gone up a lot: https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH
Again, I wasn’t talking about productivity, that is orthogonal to my point. I was talking about the income taxes that the government extracts from the workforce, and the income taxes the government gets are higher on average from college grads. Productivity is subjective, and while it matters indirectly to whether the economy is growing, it has no direct bearing on whether the government recoups it’s investment in student loans after losses from defaults. Income taxes directly offset those losses. Productivity... who knows, it depends heavily on your agenda and point of view.
To address your point directly, I don’t personally believe that non-grad programmers are as economically productive as grads on average. I would totally believe that non-grads are as productive at building UI widgets and CRUD apps and stuff like that. However, inventions and patents are absolutely dominated by people with postgraduate degrees. It’s not a matter of hourly output, it’s a matter of yearly compound interest, and the compound interest in computer programming is generated by research. It is overwhelmingly PhDs who are developing neural networks and AI methods right now, overwhelmingly postgraduates who are the architects of new hardware and of new software methods. These are the things making the computer industry grow larger in fundamental ways.
Having done my master's degree in neural networks in the 90's, I reluctantly have to admit that they are not all that productive in the great majority of cases where they are used (although there are exceptions). The reality is that the vast majority of what AI or neural networks are used on, is buzzword bingo.
> Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively
The original paper that this whole discussion is happening in the context of literally says that the college premium is very low, and for non whites practically zero. The whole issue is that society-wide, college education doesn’t increase the wages of people. Yes, the college educated people make much more than those without a degree, but the question is how much they’d make on average if those same people didn’t get a degree, and as the paper argues, only a little less if at all.
No, income taxes are extracted before the premium is calculated. I’m not talking about the wealth premium that a degree gives you, I’m talking about the income taxes that the government extracts from people who have degrees, which is completely unaffected by the recent downward trend in the wealth premium that this paper is calculating. This is a case where the absolute, uncontrolled data is very important to differentiate from the adjusted, controlled data.
I’m sorry, but what you’re saying here doesn’t make sense. If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same. It could be that in that scenario different people would make these wages than now, as the distortionary effect of college wouldn’t then deprive them of it in favor of some graduate from better school, but from the taxman point of view, it doesn’t really matter.
Education only adds value to the society if it allows graduates to do jobs that otherwise couldn’t be done without education. For example, surgeons require lots of education to do their jobs. If nobody educated surgeons, those jobs wouldn’t be done. Thus, educating surgeons does increase tax receipts.
On the other hand, education obtained in an MBA degree isn’t really obligatory to do the job that MBAs typically do. If nobody got MBA, those management positions would be filled anyway, potentially by different people. This way, MBA is zero sum and has no benefit for society, though it does benefit the individuals who obtain it. Government doesn’t earn extra tax from educating MBAs, MBA programs just determine who will be paying that tax.
> If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same.
No, that’s not true, you’re missing a very important point. Taxes come out of income, they aren’t extracted after you control for everything, they are extracted on your income, and the income for 4-year degree holders is 2x the income of non-degree holders on average.
You keep missing what I’m saying. Sure, the degree holders make much more, but the real question is, why they make more.
Do they make more because they learned valuable skills allowing them to do valuable jobs that otherwise wouldn’t be done? Then yes, the government extracts part of the extra productivity they generate that wouldn’t have been generated but for the education.
Or maybe do they make more because the college degree certifies them as quality people, which signals their value as good workers, leading to employers choosing them over other people? In that case, college education doesn’t make the workers any more productive. No extra value is produced because of college education. However, the college educated workers in that world still make more than not educated workers. All college does then is to determine who gets to do the higher income jobs. If nobody went to college in that world, those exact same jobs would be done anyway, it’s just employers would have to use different signals for employee quality than college degree.
I believe that our world is much closer to the latter than to the former. College is mostly quality certification to signal value, and it’s not building human capital through teaching people skills that make them more productive. This is shown by papers like above, where they find that after controlling for other explanatory variables, college premium is zero or close to zero, but also by common sense: a typical college graduate forgets 95% of the material in class, and the remaining 5% is often not likely to be used anyway, since most degrees are not teaching any practical work skills anyway (except for the job of being a college professor), and on top of that a lot of people don’t even work in a job they have a degree for.
There are two separate “premiums” calculated in the paper. One of them is income, and one of them is wealth (accumulated savings).
Only the wealth premium is going to zero, the income premium is currently still quite high and is stable.
Only the income premium matters to income taxes, the wealth premium that is going to zero does not affect income taxes directly in the short term.
The only premium that the student loan program cares about in the short term is the income premium, and the income premium has not gone down.
The question of why this all happens is indeed interesting and important, however not relevant to what I’ve been talking about here, that student loans are on balance repaid by the college income premium.
In short, the college premium from the point of view of the government’s income is not the same as the college premium to the student. It’s possible for the government to see a favorable financial return on student loans at the same time the student sees negative value in their degree.
What the “other” side is arguing is that if you’re using these income taxes as justification for the government backed loans because those loans allow the attendance of college, then it matters whether or not those same people going directly into the workforce, starting working 4 years earlier, and using their talent and ambition would end up paying a similar or greater amount of income tax. In short, you’re saying only the outcome matters and they’re saying the outcome might not be caused by college attendance.
I’m not saying that only the outcome matters, I’m saying that the government’s financial investment on the student loan program is seeing high positive returns right now, despite the default rate on those loans.
Because you’re calculating that the income levels attained (and income taxes paid) by the specific cohort who attended college are caused by their attendance, rather than merely correlated with it. If they’re caused, the program should take credit for the returns on that investment.
If that cohort of people (generally more ambitious, societal/educational rule following, and possibly more intelligent [at least more “book smart”] than the national median of college non-attendees) would have earned enough to pay the same income tax anyway, those gains cannot be ascribed to the government student lending.
I’m not arguing causation, and I’d be happy rephrasing to say that the investment sees returns precisely because higher income taxes are strongly correlated with degrees. What causes attendance is important to the question of whether investment in college is a return from the point of view of the student, but it’s not particularly important from the point of view of the government and whether the student loan program is paying off today. Whether the government is seeing returns is not a causation vs correlation issue, it’s just a fact.
I’m looking at the raw data, not through the lens of a model that discounts absolute income & savings differences to try to answer a hypothetical question about what college is worth to the individual.
In the case of income & taxes, it’s important in this particular case (that of student loans and income taxes) to look at the raw unadjusted income, because that is what the government sees. It doesn’t matter if tuition is cutting into graduates’ savings, because the government gets it’s income taxes before people get a chance to save (or even spend!).
Your second point is hypothetical, since studies trying to control for IQ and parents’ education and all the other factors we can think of are still showing positive economic returns for college graduates. This paper is asking the question, ‘how can we calculate the return on investment in college’ from the point of view of a student, and trying to rule out factors that give you more income without going to college. However, that is not the same thing as asking ‘what would happen if everyone stopped going to college?’.
These are good points and make me want to go back and yell at the study authors for pointing fingers at 2005 while ignoring the REPAYE Act.
I think it's better terms than even you said -- 10% of discretionary. Discretionary is AGI minus 150% of the poverty rate... a real hardship borrower--say the barista with a million dollar pottery degree--could easily qualify for a $0/mo payment then have all loans discharged after 20 years. (That forgiveness would result in a massive tax bill, however...)
My only remaining quibble is that while private loans might be 7-8% of all loans, they're still large in absolute terms, and seem to cluster around the most problematic areas of education, like unaccredited schools. Yet somehow they seem to have the benefit of both worlds, nondischargability without income based repayment, unless I'm missing something.
May not be the cornerstone issue here, but still seems like the policy on private educational loans could be better.
> The non-dischargability of student loans protects the government from further losses.
This one feels like a "true in theory, but not practice." Since the change was recent, we don't know how it will turn out, but it seems _very_ likely that some percentage of folks will die with outstanding student loans. If tuition keeps rising, it will be a non-trivial amount of money.
> Under Obama’s REPAYE, your loan payments are capped at 15% of your discretionary income.
What happens to the many students who are paying at less than their interest accumulation? Does the federal government pay the difference so their loans don't at least keep growing, or does the amount they owe just keep getting bigger and bigger? And in either case, wouldn't such a capped payment scheme be advantageous primarily to the lender collecting the interest?
> The biggest puzzle is how to explain why recent grads still command significantly higher incomes than nongrads without accumulating significantly more wealth.
Is it? Permit this armchair economist a theory:
People with degrees tend to use those degrees in pursuit of career development.
Career development causes people to move to "cluster" regions e.g. Silicon Valley, New York
"Cluster" regions tend to have a high cost of living due to insufficient housing and transportation infrastructure which didn't grow at the rate of other economic development
The high cost of living eats up the additional income from the degree, preventing wealth accumulation.
Add on long-term macroeconomic effects of the fall in entrepreneurship and other indexes of economic dynamism, aligned with increases in consumer spending, and you have a high-income, relatively comfortable serfdom.
To test the theory, try controlling for geographic area - there should be a clear increase in wealth accumulation of degree-holding entrepreneurs in low cost of living areas, compared to non-degree holders who still somehow eke out a living in high cost of living areas.
Some things cost the same nationwide, for example the MSRP of a new truck. A college degree means higher income and certain higher expenses (e.g, housing), but not others. Your college debt balance is the same regardless if you earn $70,000 in an entry level Software Engineering job in Philadelphia or $120,000 in SFBA. That creates room for some arbitrage and wealth building.
You have three parties: schools, financial institutions, and teenagers.
You have four - parents. Students can’t get a loan without filling out FAFSA which requires their parents involvement. Parents could guide children in the right direction.
The teenagers in this party have no way of making sure their parents are savvy enough to guide them in the right direction- unless of course they themselves are clever enough to know.
>Policy circles are hotly debating right now how to overhaul the entire system.
No guaranteed federal loans would fix everything. This means tuition loans could then be discharged and the lender would be more discerning about loaning to a student heading to some boutique private college with sky-high tuition and ending up with a humanities degree.
How “discerning” could you be when making loans to teenagers with no income and no credit history?
The only thing that would happen is that the banks would force all loans to be co-signed. Guess who is statistically unlikely to get loans in that scenario?
>How “discerning” could you be when making loans to teenagers with no income and no credit history?
Very. They may very well take into account your grades and SAT score to determine feasibility of repayment.
>The only thing that would happen is that the banks would force all loans to be co-signed.
They may and why shouldn't they? This will deter expensive colleges and push students to cheaper alternatives like trade schools, community colleges and state schools. What's wrong with that?
>Guess who is statistically unlikely to get loans in that scenario?
People who can't pay back loans? I don't follow your point. Are you saying that loans should be made without consideration of feasibility of repayment?
The requirement of a co-signer essentially means that the only people who get to go to college are the people who can afford to go to college before they go to college. You end up with a system where people who shouldn't go to college still go, because their parents can afford to send them; but people who should go to college can't, both because they can't get the funds (even though they could pay them back as a graduate) and because the first group is driving up prices.
>The requirement of a co-signer essentially means that the only people who get to go to college are the people who can afford to go to college before they go to college
That's not what it means at all. College is not a binary option. There many schools with varying tuition. And even in a world where college tuition is much higher than it should be due to the distortion of subsidized and guaranteed federal loans, a student can make a decision that balances their financial situation and academic goals. That may involve choosing a less prestigious state school closer to home, working in the summers, or working part-time, or going to school part-time, etc.
I also don't really understand your point. The requirement for consignment of a loan is because the loaner cannot afford the loan. That doesn't change if the loan is simply guaranteed as in the present system.
>but people who should go to college can't, both because they can't get the funds (even though they could pay them back as a graduate)
Why wouldn't that be incorporated into the loan application, i.e. the ability of the loaner to graduate and join a competitive field. That's the argument I'm making. The people who are most screwed by school debt are those that went to expensive schools to get non-competitive degrees that won't enable them to pay back their debt. Nobody is crying for doctors who may carry a large debt, but also make very good money.
>because the first group is driving up prices.
Funny you should reference market mechanics now ....
Very. They may very well take into account your grades and SAT score to determine feasibility of repayment.
You act as if the SAT score is a predictive of future success. Do you know how easy it is for parents of means to pay for “sat tutorials” that will help their kids improve their scores significantly? Ask me how I know.
They may and why shouldn't they? This will deter expensive colleges and push students to cheaper alternatives like trade schools, community colleges and state schools. What's wrong with that?
So only the rich should go to the good schools?
People who can't pay back loans? I don't follow your point. Are you saying that loans should be made without consideration of feasibility of repayment?
Student loans are or should be based on the ability to pay back loans based on future earnings. Most loans are based on credit, prior repayment history and income - three things that students don’t have.
Again of course the College Board has every reason to perpetuate the myth that the SAT is about college readiness and not about how much access you have to tutorials.
Do you really think some free online tutorials are as good as $100/hour private tutor who is a college professor that we got for my son or in my case having a mother who was not only a high school Math teacher but also taught SAT tutorials? Do you really think the latter had no bearing on me having to highest SAT score in my school and the second highest in the district with 800 seniors?
I’m not bragging. I didn’t exactly live in a top ranked school system in the small town south.
Both my parents were math teachers. I qualified for SMPY/SET (and came from a rural high school where only ~10% went on to four-year colleges).
I am fairly convinced that outcome was likely from years of math education in daily life, on car trips, doing math puzzles with my parents, etc. We’re doing the same with our kids now. My daughter just scored perfect on the SSAT practice math test and finished in half the allotted time. My total extent of “dedicated” prep was under an hour. Our total extent of informal prep was thousands of hours over nearly a decade. (That test isn’t nearly as difficult as the SAT, of course.)
I suspect your mom had more to do with your outcome based on years than the expensive tutor did in a few dozen hours. (I’ll also not hesitate to do that if I think it’s needed.)
Doesn’t that kind of make my point? That kids who either grow up in an environment where they have affluent parents with access to resources or in my case, highly educated parents teaching me what ended up being 11th grade math in 8th grade is advantageous? That still doesn’t make the SAT unbiased.
Well, the question is whether you were simultaneously prepared for the SAT and for college by 18 years of daily reinforcement of the value of education and practical subject matter drilling? I believe I was, far more than someone whose parents were equally loving and caring, but who worked in a factory or a trade.
If your upbringing was causal in preparation for both, it seems the college board might be correct in claiming that the SAT measures college readiness.
>You act as if the SAT score is a predictive of future success.
It's a predictor of your odds of graduating from University.
>Do you know how easy it is for parents of means to pay for “sat tutorials” that will help their kids improve their scores significantly?
Children of Parents who care about their education will do well. News at 11.
>So only the rich should go to the good schools?
That's not what I said at all. There are lots of good schools providing good education out there. State universities, by and large, are phenomenal, frequently with a good tuition for in-state students. You don't need a boutique humanities degree from a high priced private college. You can leave those to the rich.
>Student loans are or should be based on the ability to pay back loans based on future earnings
Sure. I don't disagree with that. It's why nobody complains about doctor school debt load, because their field pays well.
What's disgusting is giving a non-affluent student tens of thousands per year in debt to get a humanities degree.
And that's the problem .... we're not discriminating enough by the chosen degree. Federal loans should discriminate by the program.
>Most loans are based on credit, prior repayment history and income - three things that students don’t have.
You're still operating within the current system where tuition has been distorted due to massive injection of federally guaranteed loans into the system.
There is no reason why you shouldn't be able to choose a good school and work part-time or do school part-time and pay your way (at least mostly). This is possible today even in the distorted market.
And finally, are you really arguing that loans should be given to individuals who cannot afford them and will not afford them with the degree they will get??
All of the policies you propose would have a disproportionate impact on black and Hispanic students, who generally come from families with less means to qualify for credit. Policies that disproportionately channel these students to trade schools and community colleges is a political non-starter.
What are you really trying to say? That black and Hispanics families are disproportionally a higher risk of defaulting but should still get loans they cannot afford? Is that your argument?
Loans are not grants nor gifts. You're not doing anyone a favour by giving them a loan they cannot afford to repay.
There are other ways to subsidize education rather than distorting the lending market.
- The others are trying to tell you, in good faith, why they think such a move would be politically intractable. Grandstanding rhetoric doesn't help your argument.
- Not requiring your parents to be rich is otherwise known as intergenerational upward mobility. If the effect of the current system is to externalize the costs of upward mobility on the rest of the society, then that's probably worth paying (to a point). The bigger problem is that government-issued loans suppress market pressure on colleges to operate efficiently.
>You are expected to pay student loans based on future income
Sure. Let's go with that. Even under that assumption, there are multitudes of reasons why a bank would require cosigners, all coming down to you being a risk factor. For example, your grades may be low (risk of not graduating), you may be choosing an expensive art college with high tuition, or a degree wit no guarantee of reasonable income.
Again, loans are not gifts. You do not do anyone a favour by giving them a loan they cannot afford.
Agreed. So I assume you’d be opposed to a policy that has the effect of requiring parental co-signing and discriminates in part based on the income and affluence of the parents?
Discharable loans would also increase interest rates by about 2%. That’s 100$ a month for 60k worth of loans, which makes them even harder to pay back.
The key here is that you wouldn't get a loan to a college that won't provide you a useful degree for the tuition rate they charge the student. You want the lender to be discerning and not give out bad loans.
Right now, the entire industry assumes students are not price conscious and you only need to sell them on the college experience instead of the price and value of the degree.
Having said that, the government can always provide grants to make things more equitable.
>you only need to sell them on the college experience instead of the price and value of the degree.
I think this is a good point because the problem with college recruiting is that they simultaneously advertise that they are an experience and a good investment, while shrugging off the responsibilities of being a good investment.
I disagree with the idea that financial institutions should be in the business of determining what a “useful degree” is because a Debian Developer I know has a degree in philosophy. He does development because he happens to like programming and the mission of the project. He doesn’t need a CS degree and I think him having a philosophy degree let’s him bring something unique to the table. Education is abstract enough that you can’t put it into discrete boxes. If you tried Universities would become business schools.
Borrowing money for college isn’t bad if the loans are low. College is expensive because of ballooning administration. Federally subsidized loans arguably gave an incentive for this. The right policy is to give Universities a disincentive to adding overhead.
and once profitability gets in the lenders' equation you'll see lot of art colleges and similar reduce their tuition costs to match their value in the job market
Ooof. That's worse, but the equation is the same. The lender does not evaluate the value of degree given the loan amount. That's the market distortion taking place, and why administrative costs (and consequently cost of education) has skyrocketed.
>Most notably, the inability to discharge school debt in bankruptcy since 2005 may have had strong effects.
>That last legal change remains bewildering to me.
I have done no research on the matter, but my parents told me that doctors would go to school on loan for 7+ years, start a practice, and discharge all their loan debt through bankruptcy.
It's skeptical of those claims of abuse that seemed to originate in Congress, but nonetheless discusses some of the other historical approaches to solve for that, such as requiring a 5-7 year waiting period for bankruptcy after graduation.
I think rayiner added some compelling points above too, income based repayment may be a substitute here to solve for this issue while preventing abuse.
People aren't allowed to drink or even smoke now till 21. Seems logical. So why do we expect a 17 year old to have the financial knowledge and understanding to take out a loan that could buy a house in a not so cheap city? With zero education about finances (they are not generally taught in schools). The availability and government guarantees of such loans are hurting everyone except these schools that are making bank while offering education of highly questionable quality.
Funny, every time I hear these stories about the declining value of college I always think why that is. Is the premium declining because so many people can at least have a chance to finance an education now? Is that really bad?
Whenever I hear someone say they don't need to go to college, I remind them Mark Zuckerberg was at Philips Exeter (2019 tuition 49k), Bill Gates and Paul Allen at Lakeside School (2019 tuition 36k), Reid Hoffman attended Putney School (2019 tuition and boarding 56k). Many of the people that make pronouncements about college not being a necessity came from wealthy backgrounds or went to the upper crust of private high schools in America. In fact whenever someone makes these crazy suggestions I suggest you look up their background and it will usually be wealthy family/private high school.
I will grant Bezos and Thiel being the exception to private schools but still they came from upper middle class / wealth backgrounds...
These individuals could do without college. The hard work and preparation at their high schools put them through a grueling curriculum. If they have enough discipline to graduate from these high schools they would have been a success with or without college.
Unless you are in similar situation, please go to college and graduate. Specific degrees do not really matter just graduate so you don't get sidelined late in your career.
I still hear people say it is not necessary. It probably isn't really necessary for most IT roles but once youthful enthusiasm runs out, every employer will look to replace you. Do not think they will value your experience and loyalty.
Another counterpoint, if it was the case a college education is not necessary to succeed at Silicon Valley, why do these firms have a difficult time hiring black or hispanic employees... Sure college may be useless for some but please don't peddle this garbage in the face of reality.
So either the Silicon Valley firms are racist and are OK with having employees that never went to college as long as they look a certain way or this is all bunk in an effort to hire young enthusiastic employees that have no room to negotiate after a certain age...
As we just saw many wealthy families bribe their children into an Ok college... I bet all the wealthy people above will make sure their children attend college. I will bet all their wives and friends went to college. I will bet they never shared a beer with friends that never went to college.
Please don't be stupid. Finish college, learn something that interest you, give back to society.
Maybe all these policy discussions are bunk and every child in America should expect the same quality of education a student at Exeter would demand.
A person in our family is a specialized nurse. Two years of school, then some more training. $60hr any hour they "wish" to work. Saturdays/Sundays are $90hr, so is any hour after 8 hours. The demand is so high he just rejects work. If he wants to work in American Samoa or Miami: hired. I hired a person to install a garage door. $900 for an hour of work. My plumber wont show up for a 30 minute $300 job. I will call again, tomorrow fingers crossed. Get your brakes replaced - look at that bill. Try outsourcing that.
Everyone I meet that works at starbucks has a masters AND 90k in student debt. Bankruptcy doesn't make student loans go away.
I think things are about to start swinging in the "non-college" direction.
You need some better contractors. I have multiple plumbers with same day service for $95 service calls. My garage door was installed for $400 and it took an afternoon.
Obviously prices vary.
I can make a living with a trade skill, but data shows I’m more likely to make a lot more with a college degree. You have billionaire dropouts and baristas with phds. But on average, degree nets you a lot of lifetime income.
I would argue averaging across all degrees is makes no sense. STEM degrees do pay off. Liberal arts degrees can pay if you want to boost a specific skill and have a solid plan for using it. E.g. getting an English degree to become a more persuasive speaker while promoting your otherwise sound and solidly executed startup.
Aside from those 2 examples there are plenty of colleges with a business model of selling overpriced useless degrees to people who can't be bothered to do some due diligence before getting a loan. Those degrees won't pay off and despite sharing the "college" name, I wouldn't average between the 2 groups.
Does STEM actually pay off, or does engineering/technology pay off?
I've got a few friends who work in science, and it seems to be a pretty poorly paying field, with a real lack of job prospects, unless you secure a job at a government research department.
30 years ago, I was trying to decide what to study. I wanted to go to medical school and my parents said that I should study electrical engineering. The reason, if I decided not to go to medical school a biology BS degree was almost useless and it was just as easy to get into medical school with an engineering degree as a biology degree.
I ended up getting a microbiology degree and an EE, went to medical school (MD PhD) but dropped out. I was able to get a great job doing programming, so Im relatively sure they were right.
With my kids Im using the same approach.
With regards to grad school, my parents' philosophy was if you could not get grad school funded by an RA or TA, then you had no business going.
I have friends with stem phds who aren’t making tons of money. But, I think in general, stem degrees pay well.
I try to use reliable data sets [0] to help understand because anecdotes are hard for me to make decisions. The data are almost always a few years old so they aren’t perfect and could miss a new trend. But it’s the best I know how to use.
Fair enough. When it comes to career advice, I prefer anecdotes to large data sets, because there are far too many variables, and it's too easy to torture numbers.
More seriously, anecdotes are terrible when giving advice to fresh high school seniors on their way to graduation. When people think of degrees in certain fields, they gravitate to the successful people (“I’ll study acting and make millions like the famous actors I know”, etc). They don’t think of and aren’t even aware of how many people get those degrees and fail hard.
That’s why they need to see the placement and salary stats to understand what their up against. Once they understand a French Comparative Literature degree has approximately no economic value, then they can make that decision knowingly. Papering over that by pointing out the one leader that happens to have that degree does more harm than good.
Correct - I didn't study a STEM subject, but I've done ok for myself despite that.
I think there's a world of difference between "I want to study acting and I'll end up successful like Brad Pitt" and "Hmm, my cousin is in marketing, and seems to have created a great career there, I should talk to them about that."
Anecdotes about people you don't know, and career stories you don't fully understand aren't helpful, but frankly I don't think massive data sets on how much the average graduate earns within two years of graduation (for example) are all that helpful either, except as a broad way to compare yourself. It's such a large number of people, you don't really anything particularly useful at an individual level (even though there are plenty of good uses for data like that).
If that friend is himself an actor, or someone else who can influence hiring decisions, then I would say go for it!
At the end of the day, people hire you. Not data. After all, who says that a teenager can tell apart badly interpreted data any better than poor anecdotes?
At the end of the day, data reflects what all those people hiring people do. Anecdotes are randomly useful for predicting because maybe you luck out and find the right person, but probably you won’t.
Teenagers should be able to understand data by the time they pick a college or career.
Even in the engineering field, pay is massively different for different types of engineers. Civil and mechanical engineers generally aren't making anywhere near what software engineers make in top markets, for example. Similar story with chemists working in biotech vs. physicists doing fundamental research.
It's really just the engineering degrees that pay off.
The sciences degrees are only obviously worth it if you then go on to become a doctor, but that's more schooling and the undergrad degree isn't a strict requirement anyway.
Most of my friends with degrees in math, physics, etc., just ended up being software engineers anyway. So the degree "paid off" for them in the same way a CS degree would, but they would've been better served just going CS.
Former government research scientist here. It also does not pay well.
In fact, funding for scientific research was cut by the Obama administration, leading to the closure of all but two of our branches and displacing dozen of workers amidst a recession.
When I transferred to academia, I took on an underpaying role, and found that the same shenanigans were afoot there. Now, we are approaching the end of the 2000s population boom, and in five years, universities will have many fewer prospective applicants for the following decade at least. The ripples of the contraction caused by the gambling of a few spoiled bankers will be felt again in another 20 years with a much smaller and resource-constrained workforce, still reeling from the burdens of loan debt and overpriced housing.
Unless Sanders gets his way, that is.
It's probably best I plan my exit in advance this go-round.
I think large demographic averages are still useful, but certainly you can look at more specific lifetime earnings for specific degrees. I’m just aware of general “all bachelor” data that’s from reputable sources like the US SSA [0].
I’m talking about averages as there are certainly schools that suck. I would take my statement to mean that every single college is a net benefit. But as a general guidance, no other information available, a degree will net me more money over my lifetime.
If I were giving advice to someone thinking about schools, I would have them review the particular school, keep costs low, and study with a particular career in mind, stem/medicine a good target.
Zuckerberg and Gates would have been elite if they’d never worked a day in their lives. Lots of people who come from money do something that doesn’t pay that well, like working in acting or the arts. Others don’t, and work as executives or found their own businesses even though there’s no danger of running out of money.
> Zuckerberg and Gates would have been elite if they’d never worked a day in their lives.
What do you mean by that? Zuckerberg and Gates are indisputably elite because they're two of the richest people in the world.
But I wouldn't call them elite beforehand, and definitely not if they didn't work a day in their lives. Their parents' money seems to come from being a lawyer, a dentist, and a psychiatrist. That's not "elite", that's something any family can achieve in two generations.
I didn't call them "Middle Class". I said they weren't elite. While elite people are in banking and elite people go to Phillips Exeter, it doesn't follow that everyone who does those things is elite.
You could argue a much lower threshold for elite, which is fine, but then it's quite a bait and switch to lead with Zuckerberg and Gates for that category.
Zuckerberg and Gates would have been elite if they’d never worked a day in their lives.
Perhaps it's just me, but in the Zuckerberg case specifically, I'd think quite a bit of luck and timing had to do with it. If Zuckerberg had been born 10 years later after the obvious social network ideas were already created? Or if he had gone to a no-name college (or none whatsoever) and Facebook had never taken off the way it did at Harvard?
Or maybe you meant they were born elite, in which case, I don't know anything about that.
The point is that Zuck and Gates had capacity to take on risk. There’s no guarantee that their risk would have paid off, but the other side of the coin wasn’t starvation and destitution. They basically had a heads I win tails I don’t lose type of situation.
This is the big idea here - being born in the right situation gives you the ability to bear risk where a lower middle class kid can’t bear that risk because if things don’t work out, that kid is going to be homeless. When you can take a lot of risk with little downside, it almost always pays off in the long run.
They seems obvious to you now but they weren't at that time. Not that I am a Zuck fan at all but he deserve credit for that and that probably demonstrate some creativity and vision from him. No ?
MySpace existed. Facebook didn’t really add much beyond that to think that others wouldn’t have come up with the same idea in Zuck’s absence. In fact, the lawsuits from the Winklevos twins would seem to imply just that.
I think the main value add - looking back on how I perceived FB when it came out and why a lot
of us started using it - was branding and a cleaner, fresh design. And the newsfeed was a new concept...
The plumber is not making $95 an hour even if he owns the business. I worked for a contracting company and we charged $118 an hour for most service calls, our technicians ranged from $20 to $35 per hour. That looks like robbery but you factor in taxes, management, logistics, vehicle maintenance and management, rent, benefits, office staff to take calls, and you get up to that $118 very quickly. Unfortunately that’s just the nature of business in the trades.
The Guys doing the work make a fraction of the hourly rate, anywhere from 15 to 35 percent (not counting benefits). The rest goes to the house.
A service call is either something simple. For example, to unclog a toilet is just the fee. If it goes over an hour it costs extra. I had to have a 80 foot line snaked out and a camera run to see what the problem was and that was $180.
Right! I need actual work done. I understand it is $95 - to flush a toilet. But like, actual work, with tools, actually doing a job for 30 minutes. It is very expensive.
> My plumber wont show up for a 30 minute $300 job.
You brought up a 30 minute job. So I shared what it costs for me for a 30 minute (or more) job. And that it’s easy to get someone to come quickly for such a job.
I’m saying that if the problem can be solved in an hour, it’s $95. This is called a “service call.” Basically coming out and fixing what can be fixed without buying parts.
Any extra labor would cost more. This is a much better situation than yours since you can’t even get a plumber to help you flush a toilet for $300. That’s unfortunate.
Thus my suggestion from me that you could get better contractors. I think it’s reasonable that you should be able to pay $100 for a 30 minute job and be satisfied. Rather than be willing to pay $300 and being unsatisfied.
You are right. I can't get home depot to throw something off the truck for less than $200 broken. (And deny it showed up). So, where you are, where you live, I envy it. I imagine a world of nice plumbers and helper people. Canada????
Don't use services with a "name" and multiple trucks that have a bunch of employees doing work under their umbrella along with a staffed office. Search for independent contractors who do their own work. And don't do what other people in this thread are doing by assuming that plumbers and other tradesmen are making big bucks because your bill is large. The umbrella companies charge a fortune and the actual workers make jack. The workers do it so they don't have to be bothered with the business end of things. I use independent contractors who know what they're doing, don't do more work than what is needed, and charge reasonable fees. I live in an average small town in the US. And yes: our main contractor is a nice young guy who actually loves helping old people who've been shafted by those big companies.
I’m in one of the top 10 metro areas. But I guess I’m just lucky. I do avoid the marketplace services (I think Home Depot’s used to be called RedBeacon) and go for independent operators as I think they have more experience and more money goes in their pocket.
$60 or even $90/hour isn’t that great if its all 1099 income. It isn’t bad either, but the extra payroll taxes and the need to buy an individual plan (if your partner doesn’t get you into a group plan) make it pretty normal.
Not sure you understand. 1099 income means they aren’t an employee. That’s not the arrangement for people making $15-20. Those folks are regular employees so they receive that income after benefits, payroll taxes, etc.
As a 1099 employee you need to be clearing at least double the equivalent employee hourly wage because there is so much overhead. Remember, a contractor doesn’t get a single day of paid vacation.
No, I understand perfectly fine and I’ve been in both situations. I’m just saying, it sucks to be a contractor with overhead and make a decent amount without accounting for the additional expense, but it REALLY sucks to be at the bottom of the income totem pole and make peanuts (in an expensive American city).
benefits only run about 30%. So a contractor wage should be about 130% of a salaried employees wage.
This does not count when a salaried employee works more than 40 hours.
My plumber charges 150/hour.
Contractors around here bill by the job. I had bids for $5000 for a 1 day job for 2 people when incorporated into a GC bid. The GC was getting 25% on top of the 5000.
I’m sure I’ve missed a few things, but 30% doesn’t begin to cover the costs that are normally borne by a larger company and factor into the “house” premium.
You have to factor in not only benefits, but also:
* federal-level taxes (there’s no employer to pay the other half, so the contractor bears the whole portion)
* tools (you buy your own tools, stock your own spares, do your own maintenance on your dime — non-billable)
* learning and mandated certifications (same as above — non-billable)
* liability insurance (non-billable)
* vehicle maintenance, taxes, tolls, and fees (non-billable)
* transit time to and from not only contracted job sites, but also estimates that may ultimately result in no revenue (non-billable)
* marketing/lead generation (Angie’s List and HomeAdvisor are free to you, not to contractors — non-billable)
* material storage (you have the keep the customer’s plywood dry if the weather changes, or if the customer has a family emergency and needs to reschedule)
In this specific case, hospitals do tend to offer good health care plans.
Further I don't believe it is possible for a hospital with all its specialized equipment to 1099 its nurses (doesn't pass the IRS '20 questions' test on contracting).
Look up agency nurses [0]. When they're paid hourly being begged for work (as OP mentioned), it's usually for a nurse who has specialized skills that can hop between hospitals/ER/offices. Essentially, they're contractors of the agency, and the hospital pays the agency. Can't recall if they're W2 or 1099 though
I think as we advance in the information age, maybe degrees are less about helping you actually get the job done, and more about serving as a mean for companies (and countries) to roughly filter high surplus of candidates. Add the fact its easier today to apply for job posts, its very hard for recruiters to filter intelligently at reasonable time.
My guess is if everyone would have first degree, the recruiters will require a second degree.
This has less weight on jobs short in candidates (i.e specialized nurse, plumber, welder, proven AI expert, or whatever is hot right now).
There is a reason there is a shortage of nurses. Not everyone finds excitement in dealing with sick people all day. Also, most highly paid nurses do have a B.S. in Nursing.
>I hired a person to install a garage door. $900 for an hour of work. My plumber wont show up for a 30 minute $300 job.
For those prices just do it yourself. Is this hyperbole or did you really pay $900 for an hour job? How complicated could it have been if it only took an hour?
But it can be dramatically diluted through lenient immigration policies (and that's exactly what happened).
Bottom line, you have to be clever stay on your toes to make it in today's economy, and even then you need lots of luck and excellent health. UBI would result in a much more just society.
UBI would just feed directly into rents because that's how prices are set.
UBI would require land value tax to ensure the public value is capture for public spending. UBI alone is a land speculator wet dream and Yang is totally wrong to be pushing it without LVT. Yes in the middle of nowhere it can help, but most people are in cities and rents will rise there to current rent + UBI amount.
Yang is willing to adjust policy positions if the data supports it. If property prices are being raised due to UBI, then I'm sure he'd support something like LVT.
That's the difference with Yang. He's the most data-driven politician I've ever seen.
Other politicians seem mostly ideological, and I don't think they'd adjust their policies even in the face of overwhelming data it's not working. Like if Warren used Antitrust law to break up Amazon and it didn't change any relevant metrics, I think she would still call the policy a success. Ideological politicians like that are way more dangerous than someone who wants to try new ideas and is willing to adjust if they don't work.
Holding onto UBI at this point is ideological for him. There is no evidence that $10k/year is near enough to alleviate people from having to take terrible jobs. $10k/year is about the equivalent of making $5/hr full time, which is below minimum wage and way into poverty.
At this point his proposal is just a really expensive handout for people that already have jobs. And what critical social services are going to be cut to foot that bill?
I can't know how Warren would adapt her beliefs in the face of contradictory data in the future, but she's done that in the past [0]. She believed in a self-correcting and fair market that would be harmed by many regulations, but then she did a study of bankruptcy claims. The results contradicted what she expected to find, and she changed her beliefs instead of her interpretation of the data.
I totally agree UBI would just be a way to transfer money to landlords. Heck you could consider SV wages as UBI; salaries are high but that income is often spent on rent or mortgages. Stock money is spent on real estate.
I agree that a significant LVT would be extremely welcome. Perhaps even more so than UBI.
I'm open to suggestions, but we've passed the point we were in from 1950 to 2000 where any mediocre person could work hard and be guaranteed a middle-class life. And that's wrong, not to mention very threatening to our democracy.
I'm sure that by some economic measurement, any mediocre person today could still work hard and earn enough to afford the same standard of living as the middle class of 1950. The main problem is that this isn't actually possible to pull off, since it costs 10x as much for things like housing and medicine that aren't necessarily 10x better. There just isn't the option to buy the crappy version from 70 years ago.
Medicine from 70 years ago can be superior to modern medicine. Which would you prefer if you couldn't breathe on your own, an iron lung or a tube jammed down your throat?
By what authority and rationale do you feel so strongly about intubation, I wonder? Could it be that the entire medical profession is wrong and you are right?
There are obvious reasons that have nothing to do with quality of care.
Iron lungs are physically large and heavy. They are expensive and difficult to move. Health insurance doesn't want to pay extra for your comfort.
With an iron lung you can talk and eat. There is minimal difficulty; simply time your sentences or swallows to match the action of the iron lung. There is also no danger of tubes damaging your vocal cords.
The choice of technology is obvious, depending on how much patient comfort is valued. It is clear that the modern system doesn't give a damn if patients are miserable.
>from 1950 to 2000 where any mediocre person could work hard and be guaranteed a middle-class life.
This is a fantasy.
I personally know a lot of mediocre hard working people, mostly baby boomers. None had or have a "guaranteed" middle class lifestyle, and many don't have a middle class lifestyle at all, even now. One moved to a retirement community to "retire" and had to get a job. Another is currently without heat.
I always wondered about that. I used to rent in a city with a relatively tight supply of rentals and thought that a UBI would fall right through to the landlords. Any good links to read about the land value tax component?
The rent thing is a bad argument against UBI, because you can make the same argument about any program that benefits the poor - even if all the UBI money goes back into rent, UBI would equalise housing spend along the way, from rich to poor and from worker to non-worker, vastly reducing poverty.
Even for people not in poverty it would help even out their income over their life cycle - more money when they have kids, find themselves temporarily unemployed, or in retirement.
Certainly land rents are totally unjust and a huge problem, and land value tax/public housing/public land ownership would be great, but the case for UBI is compelling even without any of that.
> even if all the UBI money goes back into rent, UBI would equalise housing spend along the way, from rich to poor and from worker to non-worker, vastly reducing poverty
How would that be? If your rent goes up $1000 regardless of what you're paying now, someone who earns $0 and can't afford a $600 apartment now collects $1000 and can't afford a $1600 apartment while the guy who could afford the $600 apartment by earning $1500 now has a monthly income of $2500 and a $1600 apartment.
I think UBI is a step too far. What we really need (in my opinion, obviously) is dramatic restructuring of the healthcare system. There is absolutely no reason that the single largest expense in my life should be insuring against the possibility that my family catches some terrible illness.
Pride I'd guess. Or possibly coming from a background where they don't realize that skilled labor is an option. Many people seem to think that doing physical labor is "below" them. Nevermind the fact that being a barista / waiting tables / etc. is no walk in the park either.
One thing I don't see talked about a lot is the risk involved in going to college.
All the frequently-cited studies about college look at the incomes of college graduates versus the incomes of non-college graduates, and then compare that to the cost of education, and that generally looks fairly positive.
But of students who enroll in 4-year programs, only 60% graduate within 6 years[1]. For these students, college has actively harmed them: they're saddled with crippling debt, but don't get the benefits of a college degree. Also consider that they aren't working as many hours, if any, during college, so they lose even more in wages they could have earned.
The EV if starting and finishing college is coming into question, but the EV of starting college is clearly negative if you have only a 60% chance of finishing.
Yes, this is one of the problems: many schools are letting in students who are unlikely to succeed without extra help, and not providing that help.
Many students who enter college lack the prerequisite knowledge to complete even introductory college classes, and are placed in remedial classes. These classes don't count for college credit, but cost the same as college classes there's a limited pool of financial aid available to a student, and typically this pool is smaller for remedial students, who are less likely to qualify for merit-based aid. The results are devastating: only 9.5% of remedial students graduate from two year programs within three years, and only 35.1% of remedial students graduate from four year programs within six years.
If we're talking anecdotal experience, I'm one of the people who you're talking about, and if I could go back in time, I'd a) not have done any internships and b) not have quit college. But let's not discuss anecdotes, because that's not how policy should be determined. Let's keep the focus on data.
What you're describing happens, but it's enough of an outlier that it doesn't tip the median outcomes to the positive. People with some college but no degree still have above-median unemployment and below-median earnings. In fact an associates degree only gets you below-median unemployment: it still doesn't allow you to reach median earnings.
I can't find the citation now but the biggest argument against college I've seen is that once you control for family income, life success is way more correlated to SAT scores/the college's you apply for than the ones you actually attend. This would imply that college success stats merely indicate that they are selective in who they choose to enroll.
EDIT: Its not the one I'm looking for, but I found a good one. http://conference.iza.org/conference_files/CoNoCoSk2011/gens... shows that if you control for IQ, the average person makes $100k more over the course of their whole working life by getting a bachelor's.
- This doesn't even account for the four years of work you lose by going to college instead of working.
- Its based on data from people who mostly graduated before the year 2000, and by all accounts the value of college is becoming less, not more. It's also based on a calculation when college was much cheaper.
I don't think your first dash is correct. It looks like they just integrate the curve in figure 4, multiplied by a 5% discount. This includes both tuition cost and missed work during college. Also, it's not really fair to represent this as a difference in lifetime income because of the discount rate: the college attendee makes significantly more than $100k more over their life, but the gains accrue later in life while the cost accrues earlier, so the discount rate makes the benefit smaller.
Those studies say something more like "UW Madison/U Washington/UIUC really do give you as good an education as the ivies" and quite a bit less like "college doesn't matter/is just a signal".
I have read that study, but I'm actually digging for a separate study now. I remember it split SAT score, educational attainment, and average salary into separate variables. For people with high SAT scores, average salary 10 years post graduation was basically the same regardless of level of education.
Ivy League matters if you want to be in finance or white shoe consulting.
Everything else, you just work hard at your first job and nobody gives a shit. I went to a big SUNY school and was a mediocre student. We all made out fine.
IQ correllates somewhat with income and even more with school performance, so by “controlling for IQ”, the authors are intentionally flattening and hiding some of the income variation. They’re effectively discounting for the probability of going to college in the first place. That will, of course, hide differences in income due to going to college.
The actual data shown in that reference seems to tell a different story, it shows people with college degrees earning 20-50k per year, on average, after taxes. That will sum to more than $100k over a lifetime.
The 100k is a net present value calculation, which includes a 5% per year discount, which is quite steep. 1/1.0515<0.5, 0.9530<0.25. The undiscounted difference in lifetime earnings looks, just eyeballing the figure, to be around 300-500k.
Yes, precisely. It seems like a good idea to keep an eyeball on the absolute, unadjusted numbers, even if controlling for IQ and other factor is a valid way to look at it, since the experience of being someone in the disadvantaged bracket is not a minuscule difference. Flattening the perceived income difference by controlling for IQ hides the absolute magnitude of income differences. Plus there’s always the chance that the model is wrong, and/or not accounting for everything.
They account for that plus a lot of other factors in the 100k number. Basically the conclusion is, for people born from 1920 to 1980, college was net value add accounting for everything else, but not a huge one.
Yes, I know they account for that. Why does that make sense to account for IQ? That is explicitly discounting for college!
The 100k number is a fictional number, it’s trying to answer the question of assuming the same person didn’t go to college, is it possible to calculate the true value of college.
We could argue whether they actually calculated that number correctly, but what is absolutely true -- my point -- is that the actual people who had actual degrees actually earned a lot more than 100k extra over their lives, on average. The differences in wealth, illustrated by the data in that paper (see figure 1), are 2x-3x in annual income and accumulated savings much higher than 100k.
Yeah, but those people could have earned that much without going to college. If you just take the correlation between college and income, all it tells you is that colleges skim the top percent of society, which we knew already. The question we're trying to answer is that if you have the choice to go to college or not, should you?
I believe I understand the question & goal, and maybe this is the right way to go about it, but I’m not sure. It somewhat strikes me as the wrong question -- people don’t choose college equally at all income & IQ levels, and some of the factors that (statistically) lead people into to choosing to go are already accumulating before they’re even born. As a result, the hypothetical solution that hides the factors that lead to that choice in the first place in the data might not be fairly or adequately answering the question of whether someone should invest in college, given the choice, right?
Under this model, you could have someone with a higher IQ and a degree earning more money than a non-degree holder, but have a ‘negative’ return. Does that accurately reflect the situation, should the advice be to skip college, even though the absolute financial returns might be positive?
And what does this answer tell someone who has a low IQ or a low socioeconomic status? How should they try to evaluate this choice? Does discounting high IQ and high family education give an accurate picture of the benefits of post-secondary education to poorer families?
Controlling for IQ here is difficult because the higher your IQ is, the more you would be attracted to learning for learning’s sake in the first place.
If trades make so much money, how come no one is bitching about fatcat plumbers and roofers? Why hasn't the NY Times published any articles about how "Big Plumbing is soaking the middle class" etc.? For all the ways the middle class is getting hammered, I have yet to see one book about how plumbers are killing the middle class like I have with doctors, lawyers, techbros, and bankers. Until a journalist from NY Times or Bloomberg writes a book about how the decline of the American middle class is due to a plumbing conspiracy, you're just not bourgeois. Sorry.
The issue is that trades don’t scale like all of the things you mention. Even if you own a very successful plumbing company, your ability to scale is constrained by geography, labor costs and finding people you can trust to manage your company. Not to mention, there are market forces working against the plumber trying to scale, and the plumber’s ability to affect policy is proportional to the ability to scale.
Anecdotally, plumbers charge more per hour in some cases than many lawyers make. Their income, however, is limited by their ability to book many jobs and actually carry them out. The opportunity cost of one job is exactly another job. So comparing to other wage earners their income is high, but compared to a banker that can make several loans in the course of a day where the opportunity cost is only capital (which they have practically unlimited access to being that theyre a banker) changes the situation quite drastically.
This is a great argument for starting a company in an industry where you are an expert, but this guy isn't doing house calls for hourly pay. He's taking a big cut of alllll the house calls.
According to wiki he is paying his plumbers more than I'd expect, which is cool.
>The company promotes itself as providing a high-quality service, employing "£80,000/year plumbers", charging £80–200/hour depending on time of day and service performed."
Someone said a plumbing business wouldn’t scale. He scaled a plumbing business. Obviously in scaling it, this multi-millionaire is not personally doing the plumbing anymore - you are right. I don’t see how that means he hasn’t scaled it though?
Exactly, none of the tech billionaires got where they are by coding or even designing software forever. I don't see a fundamental difference between that and managing a plumbing business.
The point I was trying to make was that the trades don’t scale like tech or banking do. It’s clear that this guy, who did manage to scale a trade, has a net worth of about 100mm after almost 40 years of scaling, whereas the most successful tech entrepreneurs have multiples of that in a quarter (or less) of a timeframe. This guy is an exception, but still sort of exemplifies what I’m trying to say. It’s worth noting that this guy may be the most successful plumber in the world (or at least on a short list of the most successful plumbers in the world). If we made a list of people in tech or finance, the people would be younger and richer by several orders of magnitude in some cases which is saying something when we’re talking about 100mm bucks.
My argument wasn’t that the trades don’t scale at all (this would be an asinine argument as I know contractors that do scale and this guy is clearly an exception to that argument), but rather that the trades don’t scale the same way tech or finance do.
Plenty of people complain in a stealthy dog whistle way WRT real estate prices and high rental payments.
There's also the value proposition where I could make $15/hr at a McDonalds, so its hard to set a labor cost floor below $15/hr. I KNOW from experience that even when everything goes wrong I can replace a kitchen faucet in ten hours. Sure it starts out as an hours work but three trips to home depot later for strange wrenches and adapters and valves and next thing you know its ten hours. Thats an absolute minimum of $150 of lost income doing likely physically easier work standing at a mcdonalds cash register or whatever. Obviously I can make way more than $15/hr doing software development. On the other hand, a plumber has seen it all, has all the tools at his fingertips, and can do it in an hour for $150, and the hardest physical labor I'll have is writing a check.
Maybe a fair price for replacing a kitchen faucet is the hourly price of any other sweaty dirty technical complicated highly skilled tool/capital intensive job, which across the entire labor market seems to run $30/hr to $100/hr billed. If I were a $100K+ extremely highly experienced and trained diesel engine mechanic like my cousin, it would be financially foolish to turn down work to replace his own kitchen faucet. Even if he paid me a fraction of his hourly to haul around his toolbox and lift things for him as some kind of apprentice, I'm still honestly financially better off being a diesel mechanic's assistant than trying to replace the faucet myself.
Google shows union building and construction trades are ALL billing around $50/hr around here, plus or minus $10/hr related to lifestyle, I suppose. Picking a fight with the plumbers means picking a fight with the residential electricians and the ironworkers all making within a couple dollars per hour of each other. It is kinda shocking how all building trades make about the same hourly.
Of course Starbucks is a better working environment if you have a liberal arts degree and a mortgage sized student loan, and only pays $11.02 nationwide average. Almost any profession on a construction site will get you five times the pay achievable with a liberal arts degree... Yes a small fraction of liberal arts degree holders will get six figure sinecures, but then again a small, yet larger, fraction of plumbers will be multimillionaire business owners.
Bankers have the luxury of taking big risks with your pension fund, losing all of it and still getting their yearly bonus when market forces are unexpected.
> Bankers are in the “Bob Rubin trade”, named after the former secretary of the US Treasury, who “collected more than $120 million in compensation from Citibank in the decade preceding the banking crash of 2008. When the bank, literally insolvent, was rescued by the taxpayer, he didn’t write any cheque – he invoked uncertainty as an excuse.
I'll save the doctors, lawyers and techbros for someone else. But there are equal examples you can find.
"The rate of underemployment—working in a job that does not require a college degree—was 42.5 percent among recent graduates."
Wow. That, plus debt, is a huge hit.
The big item that analysis doesn't consider is the commonality of college education. "Between 2000 and 2018, the percentage of people 25 years and older who had completed a bachelor's degree or higher increased by 9 percentage points, from 25.6 percent to 35.0 percent." - Census Bureau[1]. That's for the entire population, so it lags changes for young people.
Their familial controls don't make much sense to me.
An actuary's kid will have an easier time becoming an actuary. Same for lawyers and doctors. That doesn't mean that college is a non causal factor in those students lifetime earnings... Quite the opposite. You're not becoming any of those things without college.
The student went to college precisely because they understand viscerally and precisely how college sets them up for a life of higher than average earnings. And what they need to do at college to tap into that potential.
Similarly, I'm not sure I believe the claim that there's no obvious causal link between education and financial acumen.
The big difference seems to be "do you know WHY you are at college?" And in cases where the answer is yes, it's still a good choice.
> Their familial controls don't make much sense to me.
There's a lot of recent evidence that, all else being equal (controlling for educational attainment, test scores, and grades) parental income/social class has a huge impact on income.
That is, if you come from a lower social class, you can expect a lower income increase from college than someone coming from a higher social class.
There's significant policy implications here-- our long-standing goal of getting lower income kids to take college loans and go to college may not have a positive expected return for them.
no, that’s completely wrong. You are confusing averages and conditional probabilities. On average, those from higher classes may do better - that doesn’t mean that a kid from s lower social class should take that as guidance. It means we should try to erase or lessen differences of opportunities between classes.
Some of these differences are probably innate. A brain surgeon is likely smart and his kids are probably also smart. Some, but most are due to informational deficiencies and networking effects.
> no, that’s completely wrong. You are confusing averages and conditional probabilities. On average, those from higher classes may do better - that doesn’t mean that a kid from s lower social class should take that as guidance.
??? You're saying that someone should not consider the outcome distribution of people similarly situated to themselves when making a choice? Isn't that completely rejecting empiricism?
If, from a public policy standpoint, our effort has been to get to the poor to college to end poverty; and the educated poor do do better with education, but not nearly as well as their middle-class cohort; and the present-value of education is smaller than the present-value of their lifetime wage increases-- one has to question whether the policy is well informed.
If you're asserting that the picture is unduly distorted by those at the very highest spread of the income distribution-- you're right. But the effect is still when we look at median outcomes.
> Some of these differences are probably innate. A brain surgeon is likely smart and his kids are probably also smart.
Presumably we'd be able to measure this and control for this.
> Some, but most are due to informational deficiencies and networking effects.
Yes, and various kinds of cultural cues about class of upbringing that persist after education and act to limit opportunity.
“??? You're saying that someone should not consider the outcome distribution of people similarly situated to themselves when making a choice? Isn't that completely rejecting empiricism?“
No, what I’m saying is presence of a statistical pattern in a whole population is not evidence that we shouldn’t make policy to change it. Statistically, those who live in Miami are more tan than those who live in Wisconsin, on average. But if you expose a Wisconsin resident to the same amount of sun, on average they will be just as tan.
??? We're comparing the income difference (and ratio) between (poor background + college education) and (poor background + no college education) to the income difference between (non-poor background + college education) and (non-poor background + no college education).
In your example, you'd expect the Wisconsin guy to increase in tan more when you put him in the Bahamas and give him a dose of sun than the guy who started out in Miami and was given an equivalent further dose of sun.
But we've measured the opposite-- the guy in Wisconsin (poor background) does get more tan, but doesn't increase in tan (increase in income) nearly as much as the guy who started in Miami (non-poor backgrounds).
No, because we haven’t done nearly enough for the poor guy. It’s not the case that we’ve done everything possible for the poor and they still didn’t improve much. That’s false.
We're measuring the effect of one thing-- getting a poor person to college-- composed with all the other interventions that are spread through the population.
We measure the value of this-- getting to college-- as very small and even possibly negative.
We also measure interventions and their values / impacts on earnings much higher.
Going "la la la but college would be much better and itself a win if we did 50 other supportive things" is all great, but it's fundamentally handwaving in the absence of evidence.
No, we don’t measure this. The study in question tries to make college wage premium go away using questionable control variables. Sure, some skilled trades can make more money than liberal arts grads. But very few people want to be plumbers or work on an oil rig and for good reason.
1: Lots of companies will reject you on sight without a degree. I don't think it's a good thing, but it is reality.
2: With a degree your ability to move overseas dramatically improves. I moved to America after graduating. I flat out couldn't have done that without a degree. Points based systems immigration systems like New Zealand have dramatic bonuses for people with degrees.
3: You don't have to jump through the hoops and explain why you don't have a degree all the time. Stupid reason I know, but it's something I've seen friends without degrees have to do constantly - and not just in career situations. As I mentioned, I went to a no-name university. If you live in NZ, you'll know it. If you're an American, chances are, you've never heard of it. But because I have a degree, it doesn't ever really come up.
4: The cost isn't that bad, when you spread it out over a career. My degree & living costs cost about $60k NZD (~$40k USD). That's $1k USD / year, or $.50 per hour. Considering how my income has multiplied in the few years since I've graduated (SF wages help tremendously here), the actual cost is barely anything, even when you control for the opportunity cost of studying.
Where I think College returns make a lot less sense
• Paying out of state tuition for lifestyle reasons, when you're going into a relatively low paid field afterwards (e.g. teaching).
• Paying private school tuition at a school without a strong reputation
• Grad school, in general, seems to be a rip off