Politicians and commentators love to talk up the notion of a bachelor’s degree as a surefire pathway to the middle class. Statistics show that four-year college graduates earn 68% more than people with only a high school degree. This has led politicians to funnel enormous subsidies into higher education, and for some on the left to go further and call for college to be free entirely.
But a surface interpretation of these numbers violates the number one rule of statistics: correlation does not imply causation. On the contrary, those who choose to go to college in the first place could be (and are) quite different from those who do not. Differences between people may drive part of the premium in earnings for college graduates, rather than the degree itself. An examination of the true value of college must take account of these differences.
There are good reasons to think that college’s true value is much less than what is implied by surface-level numbers. Family income, for instance, affects a child’s future earnings. If college graduates come from disproportionately high-income backgrounds, their average income will be higher—but a good portion of this may be due to background, not college.
Some factors that potentially affect earnings, such as race, family background and school district, are easy to control for. But including such easily measurable attributes only tells part of the story. “Unobservable” factors such as motivation, cognitive ability and social capital all plausibly affect earnings—but may also affect whether a young person decides to attend college.
Without looking into a parallel universe to see the earnings of a specific college graduates had they attained only a high school degree, it is impossible to directly assess the true value of college. But sophisticated studies can get us closer. A new IZA discussion paper by economics Nobel laureate James Heckman (University of Chicago), along with economists John Eric Humphries (also Chicago) and Gregory Veramendi (Arizona State University), attempts to disentangle these “unobservable” characteristics from the true value of a college education.
The authors build a mathematical model which incorporates not just observable factors such as race and family income, but also proxies for factors such as intelligence. (Whether these proxies fully control for unobserved ability is dubious, but they are better than nothing.) The authors then divide the individuals they study into “low-ability” and “high-ability” groups and compare outcomes for each group individually.
The results? Having a high school degree provides an earnings boost for students across the board. Good news so far. But things get dicier once students get to college. For the “high-ability” group, a bachelor’s degree provides a moderate boost to wages—certainly lower than what we think of as the benefits of college, but still a respectable amount that makes getting the degree worthwhile.
But for the “low-ability” group, the bachelor’s degree earnings premium is nonexistent—the authors’ estimates actually show a small decline in earnings for this group, albeit not one that is statistically indistinguishable from zero. For individuals without relatively high ability, college does not appear to be a worthwhile investment, and may be a losing one once you take into account tuition costs and four years of not working.
We tend to think of a bachelor’s degree as a voucher, redeemable for higher earnings down the road. But these results show that it might be more of a complement for existing talents, to improve upon them and make them more marketable. It takes both ability and education to land a well-paying job—the latter cannot substitute for the former. College is not for everyone.
This is not to imply, however, that people in the “low-ability” category should give up hope. According to the paper, low-ability individuals with “some college” (a catchall category that includes both dropouts and graduates of two-year colleges) realized moderate gains over their counterparts with only a high school degree. Educational innovation may be key here—perhaps it is not that “low-ability” students are unable to benefit from further education, but that the established bachelor’s degree model is simply not the right one.
Nor should we take “ability” for granted. A better K-12 education system—driven by school choice—might better cultivate the sorts of abilities that a college education enhances. This could push more students into the “high-ability” group and make a bachelor’s degree more worthwhile. College cannot paper over the failures of K-12 education, but it can magnify the benefits of any improvements.
For now, though, this new evidence demonstrates that we should treat proposals to increase college attendance with great skepticism. At the very least, doubling down on the bachelor’s degree is the wrong path. College is important, but not a guaranteed ticket to the middle class.
This column originally appeared on Forbes.
Preston Cooper is a policy analyst at the Manhattan Institute. You can follow him on Twitter here.
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