What advice do economists with PhDs give to young/poor people? Become customers of colleges where PhD economists teach…

“Helping the Poor in Education: The Power of a Simple Nudge” (New York Times, January 17, 2015) is a representative of a genre of literature that was common at the American Economic Association conference that I attended. Economists, who get paid to teach at colleges, experiment with ways to get more young people from poorer-than-average families to become customers of colleges. Nobody seems to question whether this might be biased and/or misleading advice.

As noted in a previous posting, the return on investment (of time and money) in many degree programs is zero or negative. That’s in a best-case scenario where the students actually graduate, which is not a typical outcome for a person who has been dragged into college.

When experimenters provide students with advice regarding college they don’t share comparisons regarding other careers. They don’t tell people who indicate an interest in majoring in art history, for example, that the Bureau of Labor Statistics found that museum curators have a lower median pay that plumbers or electricians. Nor do they disclose that a California state prison guard earns more than a typical Harvard graduate (WSJ). Nor do they explain that a firefighter can work two 24-hour shifts per week and earn more, especially considering the value of a defined benefit pension, than a typical college graduate imprisoned in a cubicle farm every weekday (see LA Weekly for how $200,000 per year is the average total comp for a Los Angeles Fire Department worker). Certainly they don’t explain that meeting a physician in a bar and having a one-night sexual encounter will pay better than college followed by work (state-dependent, but New York (see Liza Ghorbani), California, Wisconsin, Massachusetts, New Hampshire, Maryland, Montana, and Wyoming are good starting points) and that earning a college degree may reduce the profitability of children in states that use an “income shares” model for calculating child support (since a judge can impute income to a non-working college graduate at a higher level than would be imputed to a non-working high school graduate). Nor do they provide any encouragement to young people to attend colleges that employ fewer professors per student. For example, you could argue that for a lot of young Americans, assuming that they had moral objections to earning 100 percent of household revenue from children produced out of wedlock, the economically optimum strategy would be to work weekdays 9-5 from age 18-22 while spending evenings earning a Bachelor’s degree at the online Western Governor’s University. WGU employs 2,000 faculty members to serve about 54,000 students, a 1:27 ratio.  This compares to an average liberal arts college ratio of 1:11.6 (US News), Harvard’s 1:7 ratio, and a national average for all schools of about 1:15 (collegefactual.com). None of the studies that I have seen from academic economists have them experimenting with telling young people about a way to earn a college degree, without losing four years of income and four years of work experience, that would result in fewer jobs for academic economists.

The three areas that I know best are aviation, photography, and IT/software engineering. Absent getting an Ivy League degree it is hard for me to imagine how a young person wouldn’t be better off working in the field for four years while earning an online degree at night. A Harvard graduate with 40 hours and a Private certificate is not going to get hired by an airline and, due to Harvard often requiring students to take a gap year, this person is 23 years old. The 18-year-old who starts flight training will be an instructor by 19 and a regional airline pilot by age 22, right around the time the WGU degree is being mailed (e-mailed?) out. A WGU graduate who has been an apprentice for four years in a commercial photo studio is in a much better position to get work as a photographer than someone fresh out of a traditional offline university, both in terms of skills and connections. A WGU graduate, age 22, who has four years of work experience, with references from employers who say “this person showed up on time every day and kept the systems running” is a much lower risk hire than a fresh CS grad from a 2nd- or 3rd-tier college.

12 Comments

  1. Izzie L.

    January 21, 2015 @ 4:35 pm

    1

    If you read the article, it turns out that all you have to do to get people to go to college is send them a few text messages now and then. I can understand this – I myself was planning to go to college after I finished high school and had applied and been accepted, but over the summer I had completely forgotten all about it. It just escaped my mind. Then I got a text message (actually it was a telegram – cell phones hadn’t been invented yet) reminding me what I was supposed to be doing after Labor Day and that brought it all back to me and now I is a college grad-u-ate. That one text message which only cost the government $7 to send me (it cost 5 cents for anyone else, but you know how government is) completely changed the course of my life.

  2. Mark

    January 22, 2015 @ 3:17 am

    2

    @Phil,

    Why do you believe that someone possessing an Ivy League degree is different from “ordinary” college’s four year degrees, as far as income potential goes?
    This is a very serious question, as I am in my early 50’s with a toddler and I argue with my PhD wielding wife about this very subject all the time.

  3. Trevis Rothwell

    January 22, 2015 @ 10:19 am

    3

    If a young person can get a job in their desired field right out of high school, then do they even need a college degree at all, WGU or otherwise?

  4. Izzie L.

    January 22, 2015 @ 10:47 am

    4

    Mark,

    This may help to answer your question:

    http://www.payscale.com/college-education-value-2013

    Note that ROI has a lot to do with college major – engineering degrees are more valuable than gender studies degrees, so schools that award a lot of engineering degrees cluster at the top. But if you eliminate all the engineering schools, the Ivies do relatively well.

  5. philg

    January 22, 2015 @ 10:59 am

    5

    Mark: The academic papers that I have seen show a great range of returns on investment depending on the selectivity of the college and the major chosen. On the other hand there is a huge sample bias. People who can get into an Ivy League school are smart and driven and there are papers showing that if they get in but to a cheaper state school they end up earning just about the same.

    So Harvard might not beat University of Maryland if you adjust for the personal qualities of the student. But for students who are not especially academically inclined and who were not especially academically successful in high school, which are the people whom these intervention programs try to reach, the evidence is that a degree from a second-rate or third-rate school is a poor investment, assuming that degree costs four years out of the workforce and significant tuition dollars.

  6. Izzie L.

    January 22, 2015 @ 11:37 am

    6

    If you attend a place like Harvard, the classroom material that you learn may not be all that different than what you would learn at U. of M. (any M) – after all, Newton’s Laws are the same everywhere. But there are real differences in the networking opportunities. At U of M, Mark Zuckerberg will not be your roommate. Your friends will not become cabinet secretaries. Etc.

  7. philg

    January 22, 2015 @ 11:44 am

    7

    Izzie: Your ideas regarding networking certainly have anecdotal support. Zuckerberg was able to get the ideas behind Facebook from the Winklevoss twins. Sheryl Sandberg was able to meet her mentor Larry Summers. However, when economists have looked at Ivy League grads as a whole they did not do better than those who were admitted but chose to attend a cheaper school. (And don’t forget that the typical Harvard grad earns less than a California prison guard; see http://www.wsj.com/articles/SB10001424052748704132204576285471510530398 ).

  8. Izzie L.

    January 22, 2015 @ 12:24 pm

    8

    Beside the fact that these studies probably worked with a very limited N (Ivies offer need blind admissions and generous scholarships so most people who get in attend in favor of State U. – there is little economic advantage except for people who can afford to pay anyway) it is also (as you pointed out earlier) hard to control for personal characteristics. Maybe people who turn down Ivy offers are independent thinkers who would be inherently more successful than “go with the herd” types who accept Ivy offers. How can you control for that?

  9. Doug

    January 22, 2015 @ 1:52 pm

    9

    I think you sometimes read papers that say things you agree with and just take them at face value. There’s actually great evidence for high returns to schooling at less selective colleges. Seth Zimmerman’s paper (http://pantheon.yale.edu/~sdz3/Zimmerman_JoLE_5_2013.pdf) on “academically marginal” students in Florida is one example.

    And where is the research on the value of a WGU degree?

  10. philg

    January 22, 2015 @ 8:44 pm

    10

    Doug: Thanks for that link. It does show that people who finished a Bachelor’s degree, an uncommon achievement among the population sampled, earned more. But is that corrected for stick-to-it-ism? In other words, do we know if they earned more because employers valued the Bachelor’s degree or they learned something during the process or just because people who have the persistence to finish a four-year degree program earn more?

    I’ve personally found that all that one needs to do to astound customers in the software world is have the persistence to finish and launch a project.

  11. Doug

    January 22, 2015 @ 9:55 pm

    11

    The Zimmerman paper does indeed correct for all manner of unobserved differences (such as persistence) between the average college-finisher and the average person who doesn’t attend college. Technically, the method is called Fuzzy Regression Discontinuity, and intuitively, he is comparing individuals just above and just below the GPA cutoff used by FIU for admission. People on either side of the cutoff will have very similar GPAS’s and should also be very similar on their unobserved characteristics. The only difference is that those above the cutoff were far more likely to attend college.

  12. Ed

    January 27, 2015 @ 4:32 pm

    12

    You sort of get to this point in the last paragraph, but one thing that is missed that alot of these Californian prison guard/ firefighter/ electrician trades where average income is higher than that for a Harvard graduate are effectively closed shops (often they are unionized of course). Basically you get and keep these positions through networking, just like the networking that supposedly gets you and advantage at Harvard, and an actual Harvard graduate would never get hired for these jobs or some reason would be found to throw them out of the job within a year if he or she was hired.

    An Ivy League degree can hurt your job prospects by basically eliminating you from consideration from what might be called “high prole” jobs. It is a requirement for high status jobs such as law and banking, but that doesn’t do much good if jobs in these sectors are shrinking which they are. And alot of the networks at the Ivies are really formed pre-enrollment, in boarding schools or among families who know each other (I have an Ivy League degree so alot of my thinking on this is from personal experience).

    I seriously think American society gets less meritocratic each year, so my best advice for someone in their late teens is to take inventory of what the existing social network of yourself and your parents is, and plan your career path around what that gives you entry to. If you and your parents don’t have a strong network, than the best you can do is to try to get to East Asia, or into a sector that is in a bubble where they are open to hiring outsiders, the bubble will pop but at least you will start building a work history. The main vaiue of an Ivy degree at this point is that the schools are always well known so whatever value it has doesn’t seem to depreciate, but the danger is that it will mark you out as overqualified/ a threat in alot of work environments.

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