Value of a degree
Simon Collins (and Chris Knox) at the NZ$ Herald have an interesting piece about the relative incomes of university graduates and other people. It’s definitely worth reading (even though you can’t look up Statistics or Data Science or Journalism). However, there’s a built-in assumption of causation that is not entirely justified
Getting a degree can earn you a cool $1.3 million more over your lifetime than leaving school and going straight into work – but the gains vary wildly depending on what subject you study.
One of the irritating features of Graduation at the University of Auckland is that the Chancellor’s speech always includes a similar claim
We know that, compared to those whose formal education ends in high school, graduates have lower unemployment rates, higher salaries, better career prospects, and better health outcomes.
I actually used this as the topic for an exam question on causal inference in first semester. The preamble to the question says
In economics and sociology there are competing theories to explain the higher income of people with university degrees. Here are three possible examples:
- A Human Capital theory says that university education improves both specific knowledge about certain topics and some general reasoning and communication skills, so that people who gain university degrees become more valuable employees than they would otherwise have been. Some degrees are more valuable than others because you learn more employment-relevant skills doing them.
- A Signalling theory says that university education is difficult, and gaining a university degree shows employers that you are more able than other potential employees, even though the education you receive is not valuable to the employer. Some degrees are more valuable than others because they are more difficult and so people who get those degrees have higher average ability.
- A Social Stratification theory says that university education functions to show that you come from a relatively affluent or otherwise high-status family, and so you are not the sort of person that the employer likes to discriminate against. Some degrees are more valuable than others because they discriminate more effectively against low-status people.
These theories are probably all true in part. Under the first theory, the increase in income is due to your study, but under the other two it’s only partly due to your degree and you’d probably have a higher than average income anyway. The difference matters most for members of underrepresented groups: under the first theory, they’d benefit as much as anyone from education. Under the second theory they’d benefit more, but under the third theory they’d benefit a lot less.
Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »
When listening to the debates Bryan Caplan has with others, I am always surprised how much ground they conceived of his signalling argument
3 years ago
While all three theories likely have elements of truth, I see signalling as more linked to University rank whereas human capital is more linked to subject. I suspect the elite economists (e.g., Bryan Caplan) are focused on signalling as it is how the profession sorts itself. I have been at both high and low status universities, and very good work is done across the university ecosystem.
Social stratification I have thought less about, but must be playing a role as well.
3 years ago
It’s a bit different here from North America. We don’t have any highly selective institutions but do have highly selective degree programs.
3 years ago