Colleges continuously tout the "college wage premium" as justifying the high costs of a college degree. But it seems to me that comparing the average earnings of college grads with those of non-college grads is a flawed model in the sense that those who complete college degrees may have other qualities outside of the degree itself that enable them to become higher earners. Your post on the economic value of an Ivy-Plus degree prompted me to think of what the outcome might be if we were able to compare the earnings of people who were admitted to college after high school, but chose not to go on to higher education with those who earned a degree?
Also, not all colleges are created equal--does it matter where/what degrees were earned? Many people are taking on enormous amounts of debt for themselves or for their kids based on their confidence in the college wage premium, but it seems they may be looking only at top-level results that colleges want them to focus on, and not on the probable outcome for their particular situation. Am I missing something?
Very interesting stuff! Perhaps I'm being dense, but it seems to me that the college wage premium is not just the equilibrium price derived from the interaction of supply / demand for "skills". Doesn't it also reflect the magnitude of the skill gap between college and high school students in a given society? Assuming that there are a basket of key skills that a students needs in order to be employable at a given salary (reading, math, teamwork, etc.), in an economy in which the average high school graduate performs at the ~same~ level as the average college graduate on those key skills, presumably the college wage premium goes to zero. Maybe Sweden just has awesome high schools, US has relatively poor ones, and Chile's are, on average, dire?
Colleges continuously tout the "college wage premium" as justifying the high costs of a college degree. But it seems to me that comparing the average earnings of college grads with those of non-college grads is a flawed model in the sense that those who complete college degrees may have other qualities outside of the degree itself that enable them to become higher earners. Your post on the economic value of an Ivy-Plus degree prompted me to think of what the outcome might be if we were able to compare the earnings of people who were admitted to college after high school, but chose not to go on to higher education with those who earned a degree?
Also, not all colleges are created equal--does it matter where/what degrees were earned? Many people are taking on enormous amounts of debt for themselves or for their kids based on their confidence in the college wage premium, but it seems they may be looking only at top-level results that colleges want them to focus on, and not on the probable outcome for their particular situation. Am I missing something?
Very interesting stuff! Perhaps I'm being dense, but it seems to me that the college wage premium is not just the equilibrium price derived from the interaction of supply / demand for "skills". Doesn't it also reflect the magnitude of the skill gap between college and high school students in a given society? Assuming that there are a basket of key skills that a students needs in order to be employable at a given salary (reading, math, teamwork, etc.), in an economy in which the average high school graduate performs at the ~same~ level as the average college graduate on those key skills, presumably the college wage premium goes to zero. Maybe Sweden just has awesome high schools, US has relatively poor ones, and Chile's are, on average, dire?
Thanks David. Keep up the good work!