Sunday, March 13, 2011

Is college really worth it

The current recession has generated a slew of articles questioning whether with the rising costs of a college education and grade inflation, is it really worth it to go to college (and get that degree)? Here are some top links that I came across just googling "what's a college degree worth":

1. NYT asks whether those who go and don't finish are better off not going at all: A small but influential group of economists and educators is pushing another pathway: for some students, no college at all. It’s time, they say, to develop credible alternatives for students unlikely to be successful pursuing a higher degree, or who may not be ready to do so. (See also David Leonhardt's rebuttal and a counter by Floyd Norris.) A similar vein at the New Yorker.

2. The WSJ asks what's it really worth? The arguments are about specific numbers and the convetional wisdom has been that it has been around $1 million in life time earnings. Current thinking is that it's probably around half of that in present value terms. Coupled with the college costs of $30,000 a year, the returns are looking rather slim.

3. A nice list of links are also at College Stats.

If we assume that the returns to college follow some kind of distribution and compared it to the distribution of just having a high school degree, is a college degree vastly superior (in terms of dominance of the distribution). Expected returns (means) are definitely higher (see the Leonhard post above) - but is the mean of college graduates so far to the right of the distribution that they are guaranteed to make more than high school graduates.

Below are smoothed plots showing the actual weighted earnings of high school graduates versus bachelor degree holders (ages 25-54) from the 2010 Current Population Survey (March Supplement):

Update: The mean of HS graduates is low relative to Bachelor degree holders mainly because there are many more HS graduates than there are Bachelor degree holders. The peaks of the earnings distribution however, seem to be indicate that the median earnings are not that much different - but they are: $34,000 versus $53,000.

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