Is the college wealth premium *zero*?

Now this one is a stunner:

The college income premium—the extra income earned by a family headed by a college gra duate over an otherwise similar family without a bachelor’s degree—remains positive but has declined for recent graduates. The college wealth premium (extra wealth) has declined more noticeably among all cohorts born after 1940. Among non-Hispanic white family heads born in the 1980s, the college wealth premium is at a historic low; among all other races and ethnicities, it is statistically indistinguishable from zero [emphasis added]. Using variables available for the first time in the 2016 Survey of Consumer Finances, we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added bycollege and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment. We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education.

That paper is by William R. Emmons, Ana H. Kent and Lowell R. Ricketts, and comes from the St. Louis Fed, not from some bunch of (college-educated) cranks.

Via the excellent Samir Varma.

Comments

Does this go into the win or loss column for the idea of meritocracy?

Or does it simply reveal that the increasing concentration of wealth in American society took place while a lot of people who considered themselves intelligent were simply swindled in truly epic fashion?

It’s treating intelligence and conscientious as a variable to be controlled, then treating the dependent variable as another independent variable to be controlled for income. Jfc.

For the love of god, use tax return data on wage income, control for IQ and endowment effects, and then evaluate.

I’m beginning the terrifying process of realization that the top half of economists go straight into industry, and the evaporative cooling effect is a one way ticket to idiocracy.

We’re faced with a generation of academic economists who weren’t hired by McKinsey or hedge funds.

Yikes

worth enough for me. In my opinion,

Excellent way of telling, and fastidious paragraph
to get facts regarding my presentation topic, which i am going to present in university.

before.|

Do they distinguish between type of college degree?

STEM versus grievance studies?

Or profit vs non profit?

ITT vs MIT ?

Use your own money too collect data, analyze the data, write a paper, get it reviewed by a bunch of economics PhDs, and get a degree in economics. Then see if your earnings increase enough to repay the costs of all your own work and paying others to collect data.

If not, then I guess you can call it "grievance studies".

They seem to say that since income for all graduates continues to grow, "quality of education" is not to blame. Instead, the income premium is not translating to a wealth premium as well as it once did. Various explanations are discussed.

"We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education." And the vacuousness of much education.

See pages 17 and 18.

All about assets having nothing to do with education.

Right, because the paper is about translating a wage premium (which they see) into a wealth premium (which they see declining).

"we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added by college and a postgraduate degree fall by 30 to 60 percent."

Maybe those benefits of parental education and financial acumen are realized (meaning made real) by the smart parents telling their children to go to college, and the students with financial acumen realizing that it's a good idea, financially, to go to college.

To their credit, the authors are well aware of this and talk about the "mediating" effects of college education on parental education and on "innate" financial acumen. (Although to me the notion of innate financial acumen smacks of models where the explanatory power is taken up in fixed effects, i.e. not a real model but one where the researchers just wave their hands and say the differences are explained by some dummy variables and fixed effects. "Innate" financial acumen? Is there a gene that has dollar signs affixed to it?)

I don't have time at the moment to look at how they measured the mediation effect; my initial glance made me wonder what they're doing, they don't seem to be using standard econometric models to correct for endogeneity. Or maybe they are, I didn't have time to look closely, I will take a closer look later. I wonder about the background of the researchers, where most econometricians would simply say "endogeneity" and work to deal with the problem, they invoke "mediation" which is something that I see from the other social sciences and rarely in economics.

I was a little bugged by the idea of "controlling" for the parents level of education, since the normal way of things (Peter Thiel excepted) is for college-educated parents to urge their kids to go to college. But I'll admit I haven't read the paper yet.

On the one hand, if you take identical twins and one of them goes to college and the other doesn't... well, there's probably a reason why the one didn't, and it's quite possibly that they had an idea for something to do that would have as good or a better return than college, right?

On the other hand, if there's an income premium but not a wealth premium then that has little to do with college... unless it's just that the cost of college completely offsets that income premium?

I'm grappling with this result a bit. If you are bad with finances, it doesn't matter how much money you make, you'll just spend it all, so for people who are bad at finances you might see zero wealth premium even with a sizeable income premium. But what does it mean that they controlled for financial acumen? Two people with high financial acumen, one makes more money than the other, and there's no difference in wealth? That doesn't make much sense. Controlling for financial acumen does all the work here so the details are important.

Well buying a house and starting a 401(k) before the Fed inflated assets looks like a good trade over going into college debt so far.

Precisely - though only the sort of person likely to say OK boomer would likely describe this as part of a swindle.

The current, average P/E ratio of the S&P 500 is below its 25 year average. That does not scream over inflated to me.

I'm sure you understand that he refers to asset prices,not returns. All that 'quantitative easing' has done little more than inflate shares, real estate etc.

The P/E ratio tells us that stock prices are not actually out of whack compared to returns.

Specious argument; the Shiller p/e ratio is above the 90th percentile over the past 140-years!!!
https://www.multpl.com/shiller-pe

One issue with this paper is it doesn’t seem to count the college degree itself should be counted as a valuable asset. If the college degree itself increases incomes, then it is arguably an asset with value equal to the net present value of future income premiums and should be included as an asset. Someone with $X in stocks, bonds, and housing is not as rich as someone with the same $X in stocks, bonds, and housing, plus a college degree. Including the college degree itself would likely result in a college wealth premium.

You're begging the question. "If the college degree itself increases incomes" is what the paper is trying to determine.

+1

Points to TMC for using the concept "begging the question" correctly.

The paper found that the college degree increases income though. It just didn't find that the college degree increases wealth (presumably because it counted the costs of getting a college degree without the value of the degree itself).

What if I'm a few inches taller than average? Height is correlated to higher income. So a tall person with $X is wealthier than a short person with $X?

PS, are you going to pay wealth tax on your college degree?

I would say yes, height should be counted as human capital, and human capital is a valuable asset. For most people, human capital is their most valuable asset.

Regarding a wealth tax, your point is one of the main problems I have with a wealth tax--it is hard to measure some forms of wealth such as human capital, so a wealth tax would ultimately disproportionately target easily measurable forms of wealth such as stocks and bonds and therefore create a distortionary effect as people invest in harder-to-measure forms of wealth such as education even if doing so would be less efficient.

It would be simpler just to eliminate differences in human capital. We can start with height.

Nah, we can stop with height! Tax according to height. It has been suggested in serious circles.

Controlling for parent education results in the wrong counterfactual. Once the parents are part of the upper middle class, the kids spend money on college to keep the status, not to continue to advance to the upper class. Controlling for financial acumen is obviously going to reduce excess returns because most college programs (including STEM) teach nothing about personal investment approaches, which ends up accounting for massive difference in lifetime wealth between people.

Consider, if my parents are lawyers, I have a strong law network. I can get a decent entry level job after law school even though generally the industry is over supplied. However, if I didn’t go to college / law school, I shouldn’t expect I can network my way into being a lawyer.

The parents network is necessary but not sufficient. The financial acumen is a multiplicative effect not additive.

Looking at advanced education as an investment, like buying shares of GM, that will pay off with big future dividends is silly in many ways. An increase in knowledge, which is what education is actually about, is meant to make one a better human being. It might make that educated person rich or it might not, other things enter the equation. Looking at such a thing in strictly economic, mercenary terms is short-sighted. As it happens, there's no shortage of degreed baristas, bureaucratic data entry specialists and sales folk. The obsessive American quest for maximum income guarantees that this will be the case, at least until higher education commits suicide by raises their prices beyond reason. We're already seeing the fall out of this with declining college enrollment in less-than-exclusive schools.

Of course the aspiration to be a better human being is valuable. On average, nowadays college likely makes us worse human beings.

My younger son, who started working for a plumber right out of high school still has a higher net worth than my other son an engineer who is 1.5 years older and is now 4 years out of college.

Those 4 extra years of earning, saving and investing take a while to overcome.

My assumption as well when reading the headline.
Born in 85 gives 16 v 12 working years.
40K v 70K income gap. Post tax, maybe that’s 40K v 65K?? So earnings through 35yo becomes 640K v 780K. Tuition brings that a little bit closer.
Regardless, it doesn’t help explain the change in recent years.

Perhaps this cohort isn’t inheriting their parents wealth as quickly as in the past?

Good analysis.

I'm wondering about other variables: leisure time? Can college be considered a form of leisure (no job pressure)?

I'm guessing an engineer carries more personal liability, thus more stress, than a plumber. Maybe not.

Who would report more job/life satisfaction in later years?

The extra income is nice. On the other hand, he's working as a plumber. I suppose if you do it when you're young, and then you start your own company and hire people to do the actual dirty manual labor ... But then you're an HR department and supervisor, dealing Edith complain and workers who flake out it go into competition with you. And promotion ...

How many jobs that follow a university education are as challenging and rewarding as what a plumber does? Most of what I see they rarely are. It isn't the jobs or the work they do, it is who they end up working for.

It is really easy to get a job where you are shuffling papers, filling out reports and having to take responsibility for processes that you have no control over. Or working for government, or some government controlled enterprise, which is profoundly frustrating.

I suspect much of the wealth difference is where you have to be to make the higher income. If your housing costs are 3x what a plumber in a mid sized city pays, who is better off?

To make a broad generalization, modern college (especially at top schools) will let you graduate unless you drop out / are committed to a psych ward. The rise of area studies are one way that modern colleges accomplish this. So the signaling value of a degree has decreased. These area studies also probably cause STEM to be less diverse (how much?).

You are also less likely to meet a future partner in college, so that benefit is disappearing as well.

I'm not surprised some in the humanities are fearing an extinction event. They probably get the ultimate cause wrong, though, and their declining status stems from rational valuations that outsiders make.

There are too many people with college degrees. Many are working in jobs that don’t require a college degree. So there will be no premium for a college degree if you’re working at the post or as a bartender. See Bryan Caplan.

How can there be too many educated people? Aren't people supposed to be educated? In fact, how can people be effective members of the faux-democratic society if they don't understand how it works and how to interpret the bogus information that they receive from it? Complaints about secondary education are pervasive so society should rely on it to produce citizens?

On average, they ain't being educated! What's the opposite of becoming educated? Becoming uneducated? Dis-educated?

There's a revealing word in Italian, maleducato, which I'd like to appropriate as a descriptor. However, it actually means rude. Then again, that's close enough.

How can there be too many educated people?

He didn't say anything about education, he talked about college degrees. Granted, many uneducated people, particularly with college degrees, don't understand the distinction.

In fact, how can people be effective members of the faux-democratic society if they don't understand how it works and how to interpret the bogus information that they receive from it?

Given the large amount of bogus information being drilled into the heads of the impressionable by college professors, is your theory that this somehow works like a vaccine, where exposure produces immunity? Because there's no actual evidence this works.

+1 many slightly dopey better-than-average educated sorts overestimate 3 years of further education on information comprehension relative to a matched secondary and even primary education achievement cohort.

Lifelong education perhaps enables informed democracy, 3 extra years of expensive, much less efficient than high school education, probably not so much.

The typical US university is patterned after the oldest German institutions, like the University of Heidelberg, founded in 1386. In that era acquiring an education meant travel to a specific location and attendance in person at lectures given by an acknowledged expert. This system survives today despite dramatic advances in communications technology.

It is now a fact that any person of normal intelligence and a modicum of ambition can, and in many cases, must, maintain a conscious level of education in whatever field that he might make his living during his lifetime. This is far easier now than it was in the fourteenth century. Information and knowledge about virtually any subject are readily available at low cost or even at no cost, other than the effort necessary to find them.

Even in an illiterate world, education is the product of experience. Institutional education is meant to effectively spread the experience of a few to many. Modern technology makes the institutional education an expensive and perhaps unnecessary luxury for the elites.

"...attendance in person at lectures given by an acknowledged expert."

Not too many experts are giving lectures. Graduate assistants, untenured itinerant PhDs, tenured professors using the same syllabus they copied from their predecessors many years earlier.

These days many courses don't educate ... they indoctrinate.

Not the the students care. They show up. Memorize answers for the next test. Forgot those answers in a few weeks time. Get a grade. Rinse ... Lather ... Repeat.

Much like most of my fellow students 45 years ago.

The cost, though, is an order of magnitude - or more - higher than it was.

False. The typical US college is akin to English religious institutions of a by-gone era. US research universities have all come to imitate German universities after the Humboldt Reforms, ca. 1830 [?]. [Humboldt believed that teaching should be guided by current research, and that research should be unbiased and independent from ideological, economic, political or religious influences.]

The high transport costs, along with wealth, were obviously a selection criterion.

And US colleges, perhaps also much of universities, are still, or again, religious! :-)

>> How can there be too many educated people? <<

Kids often leave college knowing less than when they went in. See studies on the CLA tests (college learning assessments). 36% finish college with zero measured gains before and after college, and 53% show no gains after 2 years. And 1 year after graduation, the gains as measured by CLA are gone in just about all students.

Next, consider society doesn't need everyone to be highly educated. Something magic doesn't happen if everyone has a PhD. In fact, bad things happen because you paid a lot for a guy to get a PhD, but now there aren't any PhD jobs and there's a huge demand for people to drive a tractor...So you get a guy that dropped $200K on a PhD driving a tractor. That's wasted money.

College needs to be made very hard so that it the top 10% of our smartest do well but the next 10% struggle mightily (and the bottom 80% find college too hard). That's how we ensure we're educating future leaders in all fields.

There's a trend these days to dumb down college so that everyone gets good grade. Colleges are spending the first two years teaching you high-school math and writing. And you end up with a degree that is useless yet cost $90K. That doesn't help society. That doesn't help the student with the BS degree.

College must be very hard to be useful.

That's how we ensure we're educating future leaders in all fields.

This must be how it's done.

The "Leadership" trope has always bugged me. Very much a Nazi emphasis.

Not everyone needs to aspire to be a leader. But if you want to start a successful company, run a winning political campaign, get people to pick up litter on the side of the road, or even raise children, understanding how to motivate people, negotiate, and delegate tasks is pretty important.

Christ, one doesn't need to be a Fuehrer to raise children!

People picking up trash used to be called acting civilized.

The other tasks mentioned would require one hell of a lot of Fuehrers.

In the second year of my apprenticeship we were working in an office where everyone had a university education. Someone left a pay stub on their desk. I was making more.

It reminds me of an old joke. A lawyer found water on the floor in the bathroom from a leaking pipe. He called a plumber, who fixed the problem, then presented a bill. The lawyer was shocked, and exclaimed "I'm a lawyer and I can't afford this!". The plumber said that he commiserated, he couldn't afford a plumber when he was a lawyer either.

To get paid well you need to learn skills. Maybe the educational establishment isn't very good at doing that.

This is a good point. I think Wisconsin will be a reliabily Democrat for the next twenty years, maybe even more. I think Republicans would have a better outcome in Florida or California.

You don't need college education if you have or inherit wealth.

So,

Go out and get some wealth.

Nah, go out and get the right parents! :-)

:-)

Or marry well.

Done that! Or so I thought ... . :-)

We are sending too many people to college. As we dip farther down into the potential applicant pool to meet the "every child should go to college" mantra, an increasing number are unqualified to attend "college".

It's not hard to believe that the returns from college earned by the selected population of veterans eligible for the GI Bill in 1946 vanished for their grandkids generation.

It's another example of the Cargo Cult mentality that infects so much of progressive analysis - but merely handing out a college diploma does not make a student educated, competent, or valuable in the workplace.

The study says "among non-Hispanic white family heads born in the 1980s". This is really like 2 cohorts: those graduating into the GFC-recession and those that did not. The unlucky moved the mean. These people are still young so the measured low premium might eventually normalize.

In Chicago, electricians make $50 per hour... let's see... there are 3 wires... junior colleges have remedial reading and writing classes and some kids read on the 5th grade level.......

Right, the issue is that $50 / hr is 100K/yr full-time. Completing a four year degree does not get you that except software engineering. Then with 3-8 years more, most STEM and professional degrees will net that...

"We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education."

So I was a computer guy, and as I earned enough for a stock portfolio, I got some data and ran some simulations. "The luck of when you were born" jumped right out of that data for me. If you make all else equal in a model portfolio, and just vary the entry year, you get wildly different results.

(Working with average returns, or averaging Monte Carlo variations tends to hide rather than reveal this)

And of course entry to the labor force in boom vs bust decades, your job security when that first real recession arrives .. it all ties back to birth cohort.

The conclusions section of the paper is worth reading. It's a bit different than many guesses above.

If everyone goes to college, it become worthless because there are only so many jobs that actually require a degree. It can be argued that for many jobs a college degree is actually a hindrance.

Rather than looking at the household level, the US Census American Community survey 2013 had determined 10 groups of jobs where university degrees are not need and the percentages of graduate in each groups. Jobs ranging from InfoSupport ($59,059.00) to LowSkilledService ($23,584.00). From these it can be determined that the population weighted average income of the under-employed graduates (graduates working in jobs that do not require any university degrees) to be AvgGradUndPay=$42,228.40 while the average pay of non-graduate is $36,304.33 . Thus the under-employed graduates have some advantages over the non-graduate, either by their innate abilities or by the signalling of having university degrees.

From these, mashing with the data from NY Fed Reserve, on average the graduate of university majors working at the professional levels (which require university degrees) with median starting salaries (in 2019 dollars) below the average non-graudate pay (in 2013 dollars),

Ratio| MedianEarlySalary | Major
0.99 | 36000 | History
0.99 | 36000 | General Social Sciences
0.99 | 36000 | Philosophy
0.99 | 36000 | General Education
0.99 | 36000 | Environmental Studies
0.96 | 35000 | Nutrition Sciences
0.96 | 35000 | Miscellaneous Biological Sciences
0.96 | 35000 | Biology
0.96 | 35000 | English Language
0.96 | 35000 | Foreign Language
0.96 | 35000 | Elementary Education
0.96 | 35000 | Mass Media
0.96 | 35000 | Animal and Plant Sciences
0.95 | 34600 | Sociology
0.94 | 34200 | Leisure and Hospitality
0.94 | 34000 | Psychology
0.92 | 33500 | Fine Arts
0.92 | 33400 | Liberal Arts
0.91 | 33000 | Anthropology
0.88 | 32100 | Early Childhood Education
0.88 | 32000 | Theology and Religion
0.88 | 32000 | Family and Consumer Sciences
0.86 | 31300 | Social Services
0.83 | 30000 | Performing Arts

Interesting. How many of us have not come across perfectly competent and pleasant workers in Hospitality? A six per cent wage shortfall for non-degrees is very small. We don't know how this would pan out in the workers' futures: Competition from below, and such. So, roughly speaking, the degree doesn't matter.

Again, guys. This paper was not about income.

Well, the wealth has to come from somewhere! It's a paper about education, or nothing. :-)

The conclusions discuss how income fails to create wealth!

Alas, hate to say it, then it's about ... bad luck, poor decisions? Then education is a red herring.

Yes, the connection to education is truly puzzling if the study is about how people with higher incomes do not have higher wealth, which seems implausible until you remember that they "adjust" for financial acumen... somehow... which drives the result. People with high financial acumen and higher income don't end up wealthier... truly puzzling unless it's just an artifact of the limited data (e.g. birth years).

After controlling for those factors, I guess college then correlates with higher cost of living or real consumption enough to wipe out remaining advantage.

It is obvious why people with higher incomes don't have higher wealth. If the high income job is in a high cost location (as most are), then the cost of living (housing, tax, and insurance mostly) eats up much of the higher marginal increase in income. The key is to get a high paying job in a low cost location - a difficult trick to pull off.

It might be useful if it only says education is not a wealth creation cure-all, and that life success has other factors, including luck, the most basic luck of birth year.

It undermines the idea that the US has an education centered meritocracy.

Well, if accurate (doubtful) it would be a helpful corrective to the wrong-headed push to get everyone into college. You want to get a level and type of education that is appropriate to your personality and abilities. Going to college and dropping out halfway through a communications degree is a lot worse than going straight into welding for some subset of people.

That said, if income is determined by education but wealth is not, does that mean there is no meritocracy? It's like nutrition- calories in and calories out. But a lot of people can't control how many calories /dollars go out?

I agree that it argues against college for all, but the "conclusions" hint at some other society wide interventions.

(Maybe a consumer credit society is not the greatest thing to be.)

This isn't surprising. There have been two major changes in recent years.

The government used to subsidize education rather heavily, but the baby boomers, who took advantage of that subsidized education, largely eliminated the subsidies. Higher education is now expensive. It's almost impossible to get through college on cash flow. One has to accrue negative wealth.

Increasing automation makes education more important in the competition for the handful of decently paying jobs that remain. There was a collapse early in the late 19th century that made a grade school certificate more valued. There was a collapse in the mid-20th century that made a high school diploma more valued. There was yet another collapse in the second half of that century that made a college degree more valued. The current collapse has been increasing the value of more advanced degrees.

One problem is that grade school, high school and college were heavily subsidized by the government, but the college subsidies have been stripped away, and there is no sign that there will be new subsidies for more advanced degrees.

The other problem is that advanced education only provides a relative advantage. As the number of well paying jobs continues to decline, only the children of the most fortunate will stand a chance of getting one. Only a handful of jobs pay enough to enable wealth formation.

College now is heavily subsidized. And it isn't hard to graduate with little to no debt. In many states community colleges are free. Students can attend them for 2 years and then transfer to a university. Go to a state school in the state you live in instead of a private school or an out of state school and tuition and fees are often well under $10k per year. A part time job over 4 years can easily generate that much cash. Many disciplines have co-op or paid internship opportunities as well. Add in that so many students receive financial aid and the numerous merit-based scholarships and the cost of education is much lower.

You are desribing a best case scenario, not the median. California and Michigan's flagship state universities do not have in-state tuition and fees "well under" 10k.

Then, you need to factor in the cost of owning and maintaining a car for commuting students and the cost of on-campus or near-campus housing for those whose parents don't live close to a good state university campus (even then, you will have the best part-time work opportinities if you have your own car). Once you factor these in, you are looking at costs closer to 20-30k per year. Part-time jobs and financial aid will rarely cover 100% of this cost so debt invariably covers the difference.

"the handful of decently paying jobs that remain"

This discredits you

Increased production of academically uneducated must tend to equalize wages with non-academically educated. Market is working.

As more people come to doubt the value of a college degree they will become more willing to investigate more efficient alternatives. This will help those alternatives develop and improve.

Therefore the value of a college degree will be further reduced by development of better coding boot camps, MOOCs, and other paths for getting useful job skills. The result will be a more efficient economy and a more productive workforce. Exciting.

We can see this coming from the rising need for remedial education in colleges / community colleges, and the falling demands of courses.

Even when I was in college - now long ago - the "science for non-majors" courses were like kindergarten courses. I hate to think what they're like now.

This is not a stunner. For a generation, the entire college premium has been driven by the bottom falling out for those without a degree, not by increases in earnings for college graduates.

Increasing tuitions are essentially universities clawing back chunks of the lifetime value of a degree from their students.

It's simple. And disturbing.

"For a generation, the entire college premium has been driven by the bottom falling out for those without a degree, not by increases in earnings for college graduates."

Link, please

He is largely correct. The "gains" from college are, in the post-2000 world, driven not be increasing wages in real terms but by edging out those who have been truly left behind (i.e. no post-secondary education).
We see stagnant real wages here (or pitiful gains if you're an optimist -- ultra-low single digits)
https://www.marketplace.org/2018/05/23/wages-college-graduates/

And don't forget many of these young graduates are underemployed (i.e. credential inflation has caused these students to get these degrees to compete for jobs that did not traditionally require them -- which is the above poster's point).

One in three grads are underemployed:
https://www.forbes.com/sites/prestoncooper2/2017/07/13/new-york-fed-highlights-underemployment-among-college-graduates/#6a3847e440d8

Very sad state of affairs for those that are not from an elite background or work in a sector of our economy that has seen meaningful gains (i.e. Tech, High Finance and its ancillary sectors).

I won't even get into the fact that post-2000 basically the people that truly done "well" in the new economy are fewer and fewer in number (like <5%). You get the point.

Tough times ahead for these young students, especially with headwinds like crappy economic growth, demographics, QE asset inflation.

Get into an elite school and an elite industry and you have a good chance of keeping up with the economy. You may or may not do better than those before you, but you'll certainly do a lot better than your cohorts who will soon struggle mightily.

Good luck to all.

If they used the traditional definition of college graduate the result would be different, i.e. being in the top 25 percent in cognitive ability and having graduated from college. If you have an IQ of 95 you are not a college graduate just because some college took your money and gave you a gender studies degree.

To bad they can't get anonymized SAT and ACT results and redo their study with that. And add have a randomized control group of non college graduates who they could administer the SAT to. I bet the successful plumbers score higher than the degree-holding sociology majors.

I'd guess a lot of this is higher cost of living (and real consumption?) showing some correlation with degrees, such that when endogenous characteristics are controlled for, wipes out income advantage effect on wealth from degree.

Of those who are at a given level of intelligence and financial education, those that get degrees tend to move to expensive (or high spending?) places, wiping out their (small after controls?) income advantage in terms of wealth accumulation?

Of course, the nation is much richer today than it was 30-40 years ago, but most of the added wealth has accrued to a small segment of the population. Indeed, ten percent of the population holds 85% of total wealth, and the top 30% holds 97% of total wealth. Is that a problem? If not for Trump's ability to divide Americans on racial and cultural issues, candidates like Warren and Sanders would appeal to a large majority of Americans. Is it any wonder that the Republican Party has been captured by Trump: without Trump, the Party couldn't win elections.

But, you didn't include those food stamp benefits in your numbers. Or the free peanut butter on holidays

Or the Salvation Army Christmas gifts. All those benefits were denied the rich.

Merry Christmas.

Does that include pension/retirement and social security wealth? Most people have no wealth without that as they save no money. To be fair, they mostly only need to save money for retirement, anyway.

I think it is interesting how we gaze at our own navel, assuming that we are unique.

For example, South Korean college graduates unemployment rates, even in STEM: https://www.reuters.com/article/us-southkorea-jobs-kmove-insight/south-koreas-latest-big-export-jobless-college-graduates-idUSKCN1SI0QE

This has also led to the government planning to increase the number of civil service jobs to draw in these college graduates.

Is that relevant in some way to this study?

Obviously it is, but I will let you think about it some more.

And, if you don't get it by tomorrow, I will respond.

Time passed. I guess you didn't get it, assuming that is what you meant.
Obviously, if Korean STEM and other college graduates can't get jobs or get ones not using their talents, the US problem is similar; and, the fact that it extends to STEM, should be disconcerting to those who say it is simply just the degree they chose.

The thing about measuring "wealth premium" instead of "income premium" seems suspect - after all, in an efficient market, wealth premium of education SHOULD be zero, no? In the sense that the price of education should be equal to the present value of the income premium of education.

Or perhaps should be negative? After all, if I spend 10.000 $ in a degree that should give me an life income with a present value of 10.000$, if my walth is measured in the beggining of my career, the "minus 10.000$" is already counted but the only a fraction of the "plus 10.000$" is counted.

Hmm, shouldn't you expect to earn a real return on your investment? Obviously a lot hinges on the discount rate you would use for NPV calculations. Different investments naturally have different rates of return. I would assume college would have a higher rate since it requires a lot of labor and has risk.

I agree the people they studies are just entering middle age and have not hit peak earning years, and more importantly, may not have started seriously putting away money for retirement yet. This could be a matter of people who make more money choosing to have more children or something like that, right?

The notion that earnings and education have anything to do with each other is literally (((their))) biggest cons

When college actually functioned as a screening mechanism, sure, a group that rids itself of low iq, low conscientiousness, low grit will do better than a randomly selected group.

When college is mostly about showing up and agreeing with the (((professor's))) progressive political views, then yeah, it's gonna be a negative marginal product activity

Maybe it's the internet? Could a bright mind plus curiosity and the AI guidance behind Google/Siri/YouTube equate to the bachelor's-plus laurels? (In software engineering, I assert that it can.)

I wonder what the models would show if you throw out the professions where you MUST have at least a bachelor's...like teachers/lawyers/doctors...

The good thing about student loans is that they have made liberal arts degrees a commodity with a few obvious exceptions—Ivy League and graduating Phi Beta Kappa from a state flagship so one can get into a t14 law school or some other quality graduate program. But look at law schools outside of t14, they are cutting enrollment.

So don’t take out loans for a liberal arts degree because it is a commodity!! And the path to making a BA worthwhile again is by the top 100 private universities going tuition free for students from middle class families. So when someone interviews with a degree from a top private college the interviewer will know right away they accomplished something and didn’t just take out loans or have wealthy parents helping them out.

There is a huge range of college experiences. For a study like this one to be meaningful I think the research as to control for the quality of an education. Will a college that emphasizes rigor, critical thinking and a solid work ethic produce graduates that do, in fact, experience a college-degree premium? Will some for-profit degree mill? How about a middling state college that attracts middling students and makes it easy for them to graduate?

That would be a researchable question with meaningful answers. Lumping every college degree into the same pile is not.

There are totally different worlds between graduates of majors with high cognitive requirements and the rest. From the NY Fed Reserve data in the past there are clear demarcation line at IQentry=115 where the former on average under-employment (graduate working in jobs that do not require university degrees) decreases and MedianStartingSalaryu increases with higher IQentry while in the chaotic rest (IQentry≤115) there is the weird effects of on average the under-employment actually statistically increases and on average zero increases in MedianStartingSalary even with higher IQentry (by defination that are NO meritocracy)!! It is these mixed trends that diluted the effects and the SJWonk-ers by sleight of hand claimed that IQ has no effects on income and there are equality of outcomes (yes by having the chaotic situations, can everybody be brain surgeons??) In recent years people started to wake up to that and more tried to enter the STEM streams and that had weaken the clear trends in the former. If people are not used to thinking in IQ, the NY Fed Reserve data can be mashed with the entry SAT scores from EduTestServ,

https://i.ibb.co/qjbSYvN/earlysat.png

This just shows that economics works over time. College education provided a huge advantage once, but colleges have raised their prices to capture the value of that as much as they can, and the availability of unlimited, non-dischargable, government loans allows then to raise those prices enough to capture the entire advantage that education provides.

So Harvard and Devry are both considered college in this study?

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