EdMedia Commons Archive

“The College Payoff” Debate: Day Three

For our third and final part of this discussion of “The College Payoff” report, I asked  Stephen J. Rose and Richard K. Vedder different questions about the financial benefits of a college education. Have postsecondary degrees helped women, African Americans and Latinos overcome the wage discrimination they have historically faced in the workforce? Are higher career earnings alone proof that college develops marketable skills?

Your report illuminates a significant wage disparity between white (non-Hispanic) men and women, black Americans, and Latinos. Has this disparity changed over time, and–if so–how?

Rose: In general there have been narrower gaps on the basis of gender and race/ethnicity. The much publicized gender gap produced by the Census Bureau has narrowed greatly over the last 20 years as women have increased their labor market participation. In a paper for the Institute for Women’s Policy Research (http://www.iwpr.org/publications/pubs/still-a-mans-labor-market-the…), I show that only 24 percent of women were in the paid labor force 15 out of 15 years from 1967 to 1981; by contrast, this figure rose to 48 percent in the 15 years leading up to 2004.

For African-Americans, there has been a dramatic increase in their [high school] completion and college-going rates over the last 4 decades. Further, breaking down the racial exclusion barriers has increased the size of the Black middle class dramatically.

For Hispanics, they are in the process of moving from being predominantly immigrants to being educated in the [United States]. The current findings that second and third generation of Hispanics have relatively low educational attainment is a bit troublesome but will probably turn around (as happened with other immigrant groups) over time.

According to The College Payoff, those with postsecondary degrees earn more over a lifetime than those without? Is it accurate to attribute those higher earnings to the advanced education? 

Vedder: A large portion of the large wage premium that college grads receive relative to high school ones has absolutely nothing to do with what went on in college. Comparing high school graduates with college graduates is like comparing apples to oranges.

College is a screening device that helps lower costs to employers of sorting out those who are relatively bright, disciplined, ambitious, etc., from those lacking those characteristics. The average college graduate, for example, has a higher average IQ than the average high school one. In some fields–engineering, architecture and accounting are good examples–the vocational training in college does have a real payoff vocationally, while in other fields–anthropology, English and social work, for example–the college degree is much less likely to have a real financial payoff.

Adjusting for differences in traits and the risks associated with the real probability of dropping out of college, the return on a college investment on average probably today is lower than many alternative investments (although admittedly the investment climate in general appears pretty bleak at the moment).


This post originally appeared on EWA’s now-defunct online community, EdMedia Commons. Old content from EMC will appear in the Ed Beat archives.