Minimal Benefit to Marginal Students

A continuing theme at COTTonLINE has been trying to spread awareness that not all college degrees are created equal. Major matters, so does the university's prestige, or lack thereof.

Writing for Bloomberg View, Megan McArdle reviews a working paper by three economists for the National Bureau of Economic Research. She quotes them as follows:

In the early 1980s, American men with at least four years of college education earned about 40 percent more on average than those whose education ended with high school. By 2005, this college wage premium rose to above 90 percent. During the same time period, the fraction of men with a four-year college degree in the working-age population all but remained constant.

As any reader who stayed awake in basic Economics remembers, a greatly increased degree wage premium should result in a greatly increased number graduating from college ... should, but hasn't. The researchers seek to understand why people aren't behaving in an economically rational fashion.  McArdle notes:

More people start college than did in 1985; it’s just that they don’t finish. So you can’t explain this by saying that people are avoiding college because of the size of the potential tuition bills.

The increasing variance, or risk, in the earnings of college graduates means that people who enroll in college are embarking on a search process in which they discover what their likely earnings are. As they realize that they’re more likely to end up in the bottom tier of college graduates, people become more likely to drop out. Others don't don’t drop out, but graduate and then end up in jobs that don’t require a college diploma.

This model implies that the gains from pushing marginal students into college are likely to be small, for both the students and for society; those students are more likely to drop out or graduate but reap little or no wage premium for their degree.

Imagine how little demand there is for graduates in Philosophy, Women's Studies, Theater Arts or Communications, how little premium their degree earns. Marginal students often end up in marginal majors after which those who persevere to graduation earn sub-par wages.

What McArdle doesn't say: often a university benefits more from enrolling marginal students than do the students being enrolled. Particularly if it helps the university meet de facto quotas of one sort or another, transparently mislabeled as recruitment "goals."