A few thoughts re Leonhardt’s “College for the masses”

April 26th, 2015 at 3:06 pm

There may be no more highly-placed booster for the importance of college education than editor/journalist David Leonhardt of the NYT (disclosure: an editor of my occasional pieces at Upshot and someone I’ve known and respected for many years). Every few months, he writes something on this topic and he’s right to do so, both from a macro perspective–we want the best human capital inputs we can have in our national production function–or a micro one–we want people to achieve their full intellectual potential. (And FTR, I write pieces extolling full employment numerous times per week, including this one…read on.)

In today’s piece, he’s riffing off of a new study that uses an econometric technique that wasn’t around–or at least wasn’t in my tool box–back when I was learning the trade: “discontinuity regression.”  It creates a quasi-experimental design to test the impact of an intervention by comparing outcomes of people on each side of the borderline to entry to the intervention. In this case, David’s reporting on kids who just made it into college with kids who didn’t quite clear the bar. Presumably, both groups have similar cognitive skills (or at least similar SAT scores), so there’s a kind of natural experimental and control group.

…the data show that the students just above the admissions cutoff earned substantially more by their late 20s than students just below it — 22 percent more on average, according to the Florida study, which was done by Seth D. Zimmerman, a Princeton economist who will soon move to the University of Chicago. “If you give these students a shot, they’re ready to succeed,” said Mr. Zimmerman, adding that he was surprised by the strength of the findings.

Well, maybe the strength/magnitude, but the existence of an historically high college-wage premium (the wage advantage of college over non-college educated workers) is one of the best known facts in labor economics and it’s one of the reasons why almost every politician/policy maker touts the importance of higher education.

So why push this idea so hard when it already has so many converts?

As David notes, he’s pushing back on a pushback. That is, after decades of “go to college!” as the central argument against wage stagnation and inequality, two other arguments have evolved. One, not everyone will benefit from college, and two, more people with college degrees won’t fix all that ails us in terms of wage trends.

The former is covered in the piece, as various authors and economists have stressed two-year degrees, associate’s degrees, or apprenticeships as alternatives to four-year degrees. Both sides have a point (as David acknowledges) but I must say, the people I hear making the (correct) argument that not everyone benefits from college all went to college. Most have PhD’s.

The danger here is that the emphasis on four-year college discredits the rationale for seeking a lower attainment level. Research by labor economist David Autor initially suggested that there was a hollowing out in the middle of the job market, with lots of low-skill (non-college) and high-skill (college) jobs. But as Harry Holzer has pointed out–and Autor’s more recent work agrees (I think)–there is a critically important labor market space for certain middle-skilled jobs that don’t require four-year degrees (and, yes, here’s another Ph.D. making that case…actually two).

The way I think about it is a high-school educated home-health aide (a fast growing occupation, mind you), with an associate’s degree in gerontology, becomes a higher paid, higher status home health care provider, perhaps a manager in her field.

But where does that leave us as to who should go to four-year college? As per David’s piece today, pretty much anyone who can make it through, but that, in fact, is where the sleeper challenge is invoked.

If policy makers sincerely want to increase the share of the workforce with at least a four-year college degree, we need to worry as much, if not more, about completion than access. Policy, especially tuition-based policy, has always stressed the access margin—helping kids who face barriers to higher ed get into school. But the share of college-educated workers is a product of three probabilities: that of finishing high school (around 90%), getting into college (around 60%), and completing (also around 60%)—those are all off the top of my head but I believe they’re ballpark.

In other words, the completion margin is no larger than the access margin and logically deserves as much attention. In fact, if we follow David’s prescription, I’m certain the completion margin would become even more important, as more kids from the lower side of the “discontinuity” cutoff go to 4-year schools.

Which policies help boost completion? Income-based supports are important, especially among older students who have to finance their lives while in school. Also remedial supports, including not just academic counseling by “completion counseling” for those inadequately prepared.

The second motivation’s for David’s pushback is the type of argument you hear from Paul Krugman, Larry Mishel, and sometimes myself: college education will not insulate you from the same weak demand trends that have beset many wage earners for years. Here David’s essay does not say enough.

It is true—and importantly so—that the college wage advantage is at or near an all-time high. But it does not appear to be rising much, and EPI has extensive data showing stagnant real wages among college graduates (to be precise, those with 4-year degrees; those with advanced degrees have done better but they’re still only 12% of the labor force). Weekly earnings data from Autor show flat 4-year college earnings since 2000 (more so for men than women).

Here’s how I squared these two sides of the story in a recent report (not yet out):

…the education/wage debate needs clarification.  On the one hand, there clearly exists a positive wage gradient by education level.  On the other, the [get more skills, earn higher wages] story is incomplete in that more education alone won’t solve the [problems of wage stagnation and wage dispersion].  It is not hard, however, to square these observations. On average, an individual is better off with more education or training, much as marginal product theory would predict.  But a) that doesn’t inoculate him or her from stagnant trends within educational classes and b) it doesn’t speak to the wage needs of those who are not likely or able to move up the education ladder. A comprehensive wage policy agenda must be mindful of all of these nuances.

I’ve tried to stress both Leonhardt (skills) and Krugman/Mishel (power), though I’ve probably leaned more heavily on the latter because a) education has many more allies than power, and b) power, for me, is in part of function of labor demand and its absence is intimately related to the persistent absence of full employment in the US labor market since the 1980s, a realization that is too often underappreciated. The education premium can be larger than the unemployment premium for a given person, but the full-employment wage premium—the wage boost to middle and low-wage workers from very low unemployment—reaches tens of millions of workers…and vice versa. Moreover, the two are of course related: weak labor markets hurt the earnings power of college-educated workers too.

And to be clear, and fair, for all their emphases, all of the people I’m citing—Paul, Larry, David–appreciate the importance of the other thing. Let’s avoid the DC thing where someone says “X is important, but don’t forget Y,” everyone jumps on them for not caring about X.

I was talking with a colleague the other day about ways to get wages up.

“Productivity” he said.

“Bargaining power,” I responded.

“Skills!” he said, getting excited.

“Unions!” I returned, matching his urgency.

“Raise the overtime salary threshold!” he shouted.

“Absolutely!” I shouted back, “and raise the minimum wage!”

“Tax breaks for job creators!” he yelled.

“Bullsh__!” I yelled back.

Well, except for that last part, it’s all of the above. Wages for most workers have been stagnant for decades, and we’re going to have to tirelessly fight for everything helpful to change that.

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15 comments in reply to "A few thoughts re Leonhardt’s “College for the masses”"

  1. Kevin Rica says:

    If everyone gets a college education, will everyone be above average? or:

    Is college the new high school?

    But I guess if it is official government policy that we will bring in immigrants to make sure that unskilled labor is as cheap and replaceable as Kleenex, college is the only answer to stay above the whirlpool.


    • Jurassic Carl says:

      Yes. College is just a really expensive high school.

      By and large, the only credentials that really matter (and the main predictors of success in life) are who your parents are and what sort of wealth you were born into. At a fancy New England college, my experience can be summed by one comment I heard as a freshman — “Eww, I hear he’s.. working class (giggle, giggle).”

      If you are not born with such a pedigree, start a business. Get rich or die trying. Everything in life is about signalling status. Otherwise, you are worthless, scorned, or pitied. It’s how we associate, mate, and reproduce. This is the human animal.


      • Kevin Rica says:

        Carl,

        You miss the point. The “progressive attitude” to education was first articulated by the Wizard of Oz to the Scarecrow: “I can’t give you a brain, but I can give you a diploma.” So people graduate from high school with minimal academic abilities, not enough to either earn a living or be prepared for college.

        So we send them to college in the hope that they will catch up, but they are not prepared for that either in many cases. Actually, quite a few do eventually turn around, but many don’t. If you have money behind you, you have more chances to catch up.

        If you are poor, its harder. Their best chance is the military. I’ve taught lots of senior NCOs: people who weren’t ready for college at 19. In their 30s, they need to finish their BA before they hit 20 years and retirement, they are grown up, have lots of experience in doing practical things, often have developed a good curiosity, and sense of humor. They are great students.

        Other poor schlubs are just trying to get off welfare on a Pell Grant. Some of them have enough neurons, but don’t have the discipline.

        On the other hand, I’ve seen a lot of downward mobility. Kids who grow up in rich suburbs to educated parents who don’t have the motivation, but get to live in nice houses anyway (their parents’ houses). With no curiosity, they see no reason to work hard. Eventually, they will dissipate their inheritances unless the city agrees to build them a stadium and they can become president.


        • Smith says:

          This shows there may not be a growing wage premium for college graduates, but instead there is a markedly increased employment premium.
          http://voices.washingtonpost.com/ezra-klein/2010/06/the_unemployment_crisis_by_edu.html
          That means recently a college degree became more important for remaining employed. Unemployment used to track arithmetically, now tracks geometrically.
          Used to be be take college unemployment and add 2 points. Now it’s take college unemployment and multiply by 1.8. One explanation could involve the surplus college degrees, which is not to say college should not be encouraged for all, just the opposite.


        • Jurassic Carl says:

          While I generally agree with your assertions, I was speaking to the fact that class/background means more to success than the degree itself. That’s why I think that being independent and driven- starting a business,etc. is more important than ever.

          As to the readiness/aptitude issues that you present, there are no doubt concerns that may correlate with class–how much college prep, parental support, safe/gentle distraction-free environmental and family, etc. Discipline and motivation are no doubt essential.

          I was a lucky one. Although I grew up with all of the disadvantages of poverty –last of ten children, little parental support, household instability, addiction, and violence, a good deal of neglect, alcohol, thug, and drug-riddled neighborhood, no money for anything- little league or any trappings of suburban gentility/enabling environment, I was self-driven. I focused on my grades, played basketball and ran track, stayed out of trouble, ignored the noise of social instability, and found some role models outside of my family. I managed to game the system, do very well on the SAT, do a ton of those college application burnishing activities, get into a very selective private New England college, and get three quarters of it scholarship/grant-funded.. get up to a PhD, and start a decent career. Because of the class/social barriers, it was ALL upstream swimming, however.

          Your suggestion for the military is a good one. Many of my cousins’ kids went the officer route through the army and this has served them well. Heck, the GI Bill helped my dad, way back in the late 40s.


    • Smith says:

      College emphatically does not keep one above the whirlpool.

      This table (see link below) shows that from 1973 through 2011, except for a brief 5 year period 1995-2000, wages were stagnant for the college educated. They averaged just a .3% real increase per year during last expansion 2000- 2007 vs. .2% for those with just high school meaning $1,500/year more for the average $60,000/year college degree salary and $600/year for $36,000/year max for less credentialed. Those recent gains were all given back (on average) during the recession, but DNWR (Downwardly Nominal Wage Rigidities) and low inflation meant just the unemployed suffered actual loss (lower wages). They don’t call it a lost decade for nothing.
      http://www.stateofworkingamerica.org/chart/swa-wages-table-4-14-hourly-wages-education/

      Government policy is just the opposite of what you think it is regarding immigration. Prodded by business interests, especially in the tech industry (where language skills are less important), high skill immigration has and is given a priority. It was hugely increased just as the tech bubble popped in 2000, and that increase didn’t expire until years into the post-tech bubble, post-9/11 recession (ending 2004).

      Since you brought it up, an even bigger increase is built in to the proposed new immigration bill, minimally doubling if not tripling the number of high skill immigrants, even though all data point to no shortages. That immigration bill as purposefully designed by business and paid for with campaign contributions would depress wages not just by sheer numbers, but owing to the denial of basic labor freedom. High skills workers sponsored by employers can not start a new business, can not bargain, can not do anything because losing their job means deportation. There are other pernicious aspects of current proposals like ending the diversity lottery, we won’t go into that here and now.


      • Kevin Rica says:

        Smith,

        I don’t know what you believe I think “Government policy is.. regarding immigration.” I believe that it benefits new immigrants and big business at the expense of everybody else, including previous immigrants.

        But numbers count. The only good thing about temporary visa programs is that they are non-immigrant visas. The workers are not immigrants and have to leave after temporary employment. If you gave them permanent residence, their numbers would accumulate and depress wages further.

        If high skilled workers get deported for changing jobs, that reduces the labor supply and raises wages.

        I know nice people who have come here via the diversity lottery; but if they hadn’t, someone else would have sold me my coffee. The diversity lottery is its own parody.


  2. Jill SH says:

    …“Raise the overtime salary threshold!” he shouted.

    “Absolutely!” [you] shouted back, “and raise the minimum wage!”

    “Tax breaks for job* creators!” he yelled.

    “And an FTT on the money chasers!” you yelled back.

    (Let’s be sure we’re talking about job creators who really create *jobs. See my previous posts.)


  3. Smith says:

    In today’s lecture, we briefly cover the following topics:
    1) Who should go to college and why?
    2) How should college be paid for?
    3) What are the macro economic effects?
    4) How will this specifically affect inequality?

    1) Everyone should have the opportunity to go to college. They should go to get an education, to learn. It is not dependent on job outlook or future earnings. When nearly everyone has a college education, the wage premium disappears anyway, there is an equal number of applicants for any college level or below position. In real life it wouldn’t work exactly that way, look at high school level jobs as an example, everyone’s wage will actually fall if we are as stupid about it. Better make labor history a required course.
    2) College is the new high school and should be government funded. It shouldn’t rely on parents to decide for children where or whether they can attend based on the amount they can or are willing to borrow. Neither should a 17 year old assume $40,000 (or more) of debt to continue their studies. Personal debt robs any notion of equal opportunity. Look at the example of 12 free years of public education (not only free, but compulsory). Everyone will share paying for the $40,000 in income, corporate, capital gains taxes because everyone benefits. That will also provide incentive to curb excess, and make expenses transparent. Programs that limit debt repayment to income suffer from the same fallacy (17 year old must decide to spend huge amounts of money and delay career, but no burden if you have rich parents).
    3) Increasing education has huge beneficial effects. For example, people don’t realize the role factory workers with new ideas played in rising productivity in the past.
    4) 2/3 of all job openings through 2022 are expected to require only a high school diploma or less. Short term, more college graduates will lower high skill wages from increased supply. Only when a newly better educated workforce demands higher pay and changes laws to facilitate that desired effect will inequality lessen.

    And that’s the lesson for today.


  4. mitakeet says:

    Lets say that aliens are implanted in the brains of every member of congress as well as our Great President and magically college tuition costs go to zero. Will that actually change anything for the better? We already have diploma mills (yes, they are often scams, but set that aside for a moment) where anyone who ‘applies’ gets a degree. If anyone can get in to a college there will no doubt be pressure to accept under-prepared students and to get them through the system (since no college is actually educating anyone for free, there will no doubt be some sort payment based on the number of students or whatnot, sort of like our nonsensical student loan system and the moronic mortgage debacle we are still digging out of) which just means that there will be ‘college graduates’ that didn’t learn anything meaningful during their tenure. That would translate to an even more tiered education system where only those who can compete to get into the elite schools would get a ‘real’ education and the rest would be left with useless degrees (which would now be required for even mundane jobs, since it will be the only differentiation from those who managed to squeak out of high school).

    I think college should cost something, besides lost wages, I just don’t think it should cost a lifetime of monthly payments (I finished my MBA in ’95 and _still_ have 5+ years to pay $500 a month!). I think people should be required to invest something besides being too lazy to look for a job out of high school and I really think that there should be viable jobs for people who just have a high school diploma. I am sure this will offend people, but when has an English degree been worth the 4 years of lost wages? More people with degrees that are not considered valuable by hiring managers is not going to lift our economy! People should be making a clear investment of their time and money to go to school and thus should be doing economic tradeoffs (of course, since our Great Country doesn’t teach anything like economics in high school, how could they?). Of course, if we had a good high school education system then there might be less talk of needing college for everything…

    Another potential issue I see: if college becomes ‘free’ then there will be a push to use testing as qualifications to get into various programs/majors. I know several people from the European system where they basically wound up having to test into their chosen college major in middle school. Who the hell knows what they want to do for their career in middle school? Heck, despite always wanting to do biotech research (where I invested a decade into education and experience) I am instead a totally unqualified (as far as college education is concerned) computer programmer (for just about 20 years now!); who could have called that one when I was in middle school?


    • Smith says:

      1) College is already nominally free for a large segment of the student population, i.e. rich kids, children of parents who saved for tuition. However one could argue it’s also free for everyone borrowing their way through school where the true costs are only borne much later.
      2) Check other systems where college is free or orders of magnitude less http://www.top10onlinecolleges.org/college-tuition/, keep in mind number of top schools not adjusted for population. France has 2 compared to our 51 but that’s more like 10 to our 50 considering population size. Britain has 18 which is 108, and they charge no more than $14,000 for those top schools (a legislated cap) vs. our $40,000.
      3) We already tried free college for everyone and it worked. See the history of the WWII GI Bill.
      4) Tuition at state schools already only pays for 25% of the bill
      http://www.npr.org/blogs/thetwo-way/2015/01/05/375222288/student-tuition-now-outweighs-state-funding-at-public-colleges
      5) California used to have free tuition, ended in part to deal with declining enrollment due end of the baby boom and need for college draft deferment http://www.nytimes.com/1982/12/28/science/california-weighs-end-of-free-college-education.html
      6) The same arguments against free college for all can and were used against free high school all through the 19th century. Figure 11 on page 31 http://nces.ed.gov/pubs93/93442.pdf
      7) We already spend $5,000 * 12 = $60,000 adding four years when the most important learning goes on is reasonable Figure 13 on page 33, vs spending the money on junk.
      8) The costs of college need to be maintained, made transparent, and standards likewise.


  5. Richard Solomon says:

    I strongly agree that it is not an either/or proposition. The 60% rate of college completion is a significant obstacle, however. What this piece did not note are two elements to that. First, the huge increase in tuition and other fees in public universities (at least here in Calif in the last 10 years or so) has made it more difficult for students to get their degrees. Second, the decrease in course availability has sometimes required that a student matriculate for 5 years instead of 4. This has resulted in higher costs/more debt. It is a vicious cycle which is driving many students away from a 4 year institution before they can get their degrees. Finally, Governor Brown has refused to endorse a plan by the UC system to increase tuition over the next 5 years. We shall see how this ends up in the months to come.


  6. Fred Donaldson says:

    Headline and first paragraph in NYT today shows what happens when too many highly educated candidates are in a work force with too few jobs:

    “Burdened With Debt, Law School Graduates Struggle in Job Market
    By ELIZABETH OLSON

    About 20 percent of 2010 graduates have jobs that do not require a law license, a new study shows, and only 40 percent are working in law firms.”


  7. purple says:

    There are many other reasons to go to college besides getting a better job. I’m sorry, Washington won’t solve anything with this type of piecemeal inspiration . It’s just reinforcing class privilege.So rich people get to study poetry and read the classics before sauntering off the Daddy’s law firm, the poor should pick up x-ray chart reading skills. That’s all they are good for anyway, right ?


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