22.12.04

PAYOFFS ARE EQUAL AT THE MARGIN. Lifetime earnings for university graduates are higher than lifetime earnings for high school graduates. Therefore, universal college education is a Pareto improvement, generating productivity gains and greater prosperity, more evenly shared, right?

Think again. Mitch at Shot in the Dark does some careful thinking about a conversation between David at Oxblog and Matt Yglesias, starting with an observation by Alex at RAWbservations.

My degree helped get me to the front of the line. If everyone were to have that piece of paper, I have my doubts that the overall employment rates would change much and I seriously doubt that it would lead to a serious wage increase across the board. Instead, I believe the result would be a lot more college majors working at Starbucks.

The current economy doesn't have enough jobs for those of us with college degrees. There isn't a huge dearth of white collar job candidates to fill a whole bunch of vacancies. On the contrary, jobs that don't necessitate a college degree are simply requiring them to weed people out.

That's a signalling argument. A university degree simply illustrates that the holder is dependable enough to jump through hoops for four to six years beyond high school, and thus dependable enough to show up for work even though it is not required by law (which is what diminishes the signal content of a high-school diploma. Prisoners generally have perfect attendance.)

David's post gives a nod to the signalling argument, while suggesting that additional schooling indeed provides more human capital.

Right now, college graduates are almost guaranteed a decent job. But if everyone had a degree, wouldn't that just mean that educated folks wind up doing low-skill work or even unemployed?

Not being an economist, I don't have the means to answer that question in a very sophisticated manner. But I do have a hunch. Around sixty years ago, right after World War II, someone could've asked whether it was really worth making sure that all Americans got a high school education, since the value of a diploma would go down if everyone got one.

My sense is that getting America through high school represented a critical step toward creating the skilled workforce that was ready to capitalize on the use of new technologies in the 1980s and 1990s.

You might also say that once America went to high school that the value of a diploma did go down, so Americans started to one up another by going to college. Maybe someday we'll start one-upping another in the job hunt by going to grad school.

If the high school diploma is an indicator of human capital, is the one-upping investing in additional human capital, in which case people will self-select on the basis of their ability, or is it a positional arms race to acquire a stronger signal of ability? (And the one-upping with a Master's has begun, although the hypothesis that a baccalaureate is as fraudulent as the high-school diploma has become has not yet been rejected.)

Matt's post focuses on the connection between greater human capital and entry level jobs:

Now in the context of a workforce that was, on the whole, extremely well-educated and productive these jobs might just become higher paying. On the other hand, you might have a replay of the European situation where rising productivity (and a robust welfare state) made it hard to find people willing to do these jobs for the customary low wages, and instead of paying higher wages the governments chose to simply import unskilled labor.

That would be okay, too, from my perspective. It's often not realized, but allowing immigrants into the developed world to work for what are low waged by developed standards but high ones by developing world standards is one of the more effective ways to ameliorate global poverty. But if immigration to the US were to rise substantially in this way, there might be increasing pressure to do what Europe did and turn the immigrants into a helot class of "guest workers" rather than full-fledged citizens-to-be. That, in turn, could have many of the bad consequences we've seen from Europe's illiberal immigration regime.

Hmm, what ever happened to working your way through college, perhaps at one of those unskilled jobs?

On to Mitch's observations. Key question:
"So what about the kid who has a genius for working with his hands? The kid who doesn't care, for the moment, about polishing the teacher's apple, but loves tearing down engines or building things? The kid who has a talent for taking care of people, doing daycare, cooking great food - things that are noble, useful, needed skills that demand people with drive and passion, but don't require a college degree? Why should we look at at their not joining the paper chase as a "failure"?
Especially because ... payoffs are equal at the margin ... a diminished supply of master mechanics or caretakers or master chefs means the rewards to those crafts rise relative to the returns to a college degree, a rise augmented by the increased supply of college-bound but not necessarily Creative Class material.

The problem being that if you jam someone who's primarily a "doer" rather than a "thinker" or, as often as not, a "paperwork and process maven", and jam them into college, they are not going to be especially well-educated or productive - any more than if you put Matthew Yglesias, Hahvahd graduate, into chef school and told him that no other path through life was of as much value.
(Methinks Mr Berg doth presume too much. Perhaps Matt can do eggs 101 different ways. On the other hand, perhaps he is making a safe bet. There are few of my colleagues, clever though they might be, that can carry cutting oil for my Unimat.)

Repeat after me. Payoffs are equal at the margin.
And we all know college graduates in Psychology or less-vital Humanities who are working at Blockbuster, and who ten years after college are busy selling shoes; you might not know the people who went to work, or to vocational school and are making more money than the bottom 40% of lawyers, working as airline mechanics - or the ones who earn perfectly fine, sometimes excellent, livings as LPNs, daycare providers, carpenters, chefs, mechanics and a zillion other things that can't, and won't, be shipped overseas anytime soon.
Yup. (And he hasn't mentioned machinists or toolmakers.) Have I done my riff on miserable middle-aged partners at law firms who are there because that's what their teachers and their parents impressed on them as being The Thing To Do, when the reality is that What You Do is answer the phone and take on someone else's problem as your own. Most importantly,

College is a fine thing; I graduated from one. Are my friends who went through vo-ed and now work as plumbers and policemen any less important than the Harvard poli-sci grad? To say the least, no.

More kids need to know that.

Ayup.

SECOND SECTION: Ross at Andrew Sullivan observes,

I'd pose a different question, though. Suppose you tried to universalize college education -- how many people would actually go for it? At present, a little over a quarter of all Americans have college degrees, and around half try college for a while but never graduate. No doubt a lot of these people drop out, or never go, for financial reasons, and having government-subsidized college tuition would certainly raise both matriculation and graduation rates appreciably. But I'm not sure the rates would be raised to anywhere near universal levels. I think that many, many people drop out or don't go to college because they don't want to go . . . because they've spent a dozen years in school, they don't like school, and they want to get out into the world and start making money.

I saw a fair amount of this urge even among my friends and neighbors, and I come from a culture where the necessity of "going-to-college" is hammered into you starting in the cradle, if not earlier. I guess you could try to replicate the obsessed-with-admissions climate of East Coast suburbia in working class communities around the country, but I'm not sure that's either feasible or desirable. Or you could get around it by mandating college attendance, they way we mandate elementary and secondary school. But given that college-aged kids are generally considered adults, not minors (except for that pesky alcohol prohibition), I'm not sure forcing them to attend school is going to fly -- at least not in the freedom-loving U.S.A.

Finally, a faintly politically incorrect question: Isn't it possible that there's a significant segment of the American population that simply wouldn't benefit from going to college? I'm no IQ-determinist, but it seems like forcing some people into an extra four years of schooling might run, rather quickly, into a problem of diminishing returns. (Especially since I suspect that what America really needs are better elementary schools, not more emphasis on higher education.)

Indeed. Furthermore, to the extent that the university simply becomes the latest extension of compulsory education, with Freshman Experience attempting to provide the basic skills that students Used To Get in seventh grade, it simply devalues the diploma. Furthermore, because students of comparable ability realize similar returns to their degree independent of their choice of college, perhaps the problem is with the prestige-college obsession.

In the blue-collar precincts, there is a different problem. The socially prominent clique in my high school spent much of senior year evaluating whether the parties were better at LaCrosse, Oshkosh, or Whitewater. Universal access might mean an even larger infusion of party animals into the less famous universities with no concomitant surge in economic growth or any of the other spillover benefits (including Democratic registrations? Stop snarking, it's Christmas -- Ed.) the university development offices claim on their employers' behalf.

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