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Degrees cause higher earnings. Part of that effect is accumulated human capital in the form of the thing learned and new networks, but part of the degree is jus

by eonwe 10y ago

Degrees cause higher earnings. Part of that effect is accumulated human capital in the form of the thing learned and new networks, but part of the degree is just signaling. There's a drastic difference between earnings for unfinished and finished college degree and in general this effect is dubbed as sheepskin effect. Here's a Wikipedia starter on the effect: https://en.wikipedia.org/wiki/Signalling_(economics)#Spence_1973_.22Job_Market_Signaling.22_paper https://en.wikipedia.org/wiki/Signalling_(economics)#Spence_...

randomdata 10y ago
> There's a drastic difference between earnings for unfinished and finished college degree Is that really signalling, or is it that the reasons for not finishing a degree (not willing to put in the hard work, for instance) bleed into the workplace? The degree may play no part at all. Interestingly, a GED does not statistically elevate ones earning position like a traditionally acquired high school diploma. It has been suggested by researchers that the reasons for not completing high school the traditional way are what lead to lower earnings, and receiving certification does not remove those existing traits. Why would college be different? Additionally, the biggest statistical gains come from post-graduate studies. 49% of the top 1% of Americans have a post-graduate degrees. Further, there are more people with high school or less in the top 1% than there are with bachelor degree-only. This suggests to me that the gains from having a degree are skewed by supply managed professions (for example: doctors), where incomes are artificially high because the law prevents unconstrained competition. There, again, may be no advantage outside of those protected industries, and certainly not if you plan to stop at the bachelor level.
- serge2k 10y ago
  Pretty ridiculous to counter "Degree holders earn more" with "not in the 1%".
  - randomdata 10y ago
    Care to elaborate? When they say college graduates earn more, at least for anything I've ever read, it is based on mean income. Due to the way mean is calculated, and incomes tending to follow the power law, the top 1% are going to be the ones who have the largest representation of that higher average income. As such, degree holders may simply earn more because they are overly represented in supply managed industries with artificial incomes, like the aforementioned doctor.
jackcosgrove 10y ago
From your link, the results section states, "Spence discovered that even if education did not contribute anything to an employee's productivity, it could still have value to both the employer and employee. If the appropriate cost/benefit structure exists (or is created), "good" employees will buy more education in order to signal their higher productivity." The second sentence flips the causality you describe around. Employees who are already productive buy education to certify their productivity. The education does not necessarily lead to higher productivity. The employer wants productive employees, not certified employees. Certified employees are just a proxy for productive employees. Another proxy, such as aptitude tests or GitHub repositories, could function just as well. These "cost/benefit structures" may very well be more appropriate than formal education because they are less costly in time and money.

by eonwe 10y ago

randomdata 10y ago

> There's a drastic difference between earnings for unfinished and finished college degree Is that really signalling, or is it that the reasons for not finishing a degree (not willing to put in the hard work, for instance) bleed into the workplace? The degree may play no part at all. Interestingly, a GED does not statistically elevate ones earning position like a traditionally acquired high school diploma. It has been suggested by researchers that the reasons for not completing high school the traditional way are what lead to lower earnings, and receiving certification does not remove those existing traits. Why would college be different? Additionally, the biggest statistical gains come from post-graduate studies. 49% of the top 1% of Americans have a post-graduate degrees. Further, there are more people with high school or less in the top 1% than there are with bachelor degree-only. This suggests to me that the gains from having a degree are skewed by supply managed professions (for example: doctors), where incomes are artificially high because the law prevents unconstrained competition. There, again, may be no advantage outside of those protected industries, and certainly not if you plan to stop at the bachelor level.

serge2k 10y ago
Pretty ridiculous to counter "Degree holders earn more" with "not in the 1%".
- randomdata 10y ago
  Care to elaborate? When they say college graduates earn more, at least for anything I've ever read, it is based on mean income. Due to the way mean is calculated, and incomes tending to follow the power law, the top 1% are going to be the ones who have the largest representation of that higher average income. As such, degree holders may simply earn more because they are overly represented in supply managed industries with artificial incomes, like the aforementioned doctor.

jackcosgrove 10y ago

From your link, the results section states, "Spence discovered that even if education did not contribute anything to an employee's productivity, it could still have value to both the employer and employee. If the appropriate cost/benefit structure exists (or is created), "good" employees will buy more education in order to signal their higher productivity." The second sentence flips the causality you describe around. Employees who are already productive buy education to certify their productivity. The education does not necessarily lead to higher productivity. The employer wants productive employees, not certified employees. Certified employees are just a proxy for productive employees. Another proxy, such as aptitude tests or GitHub repositories, could function just as well. These "cost/benefit structures" may very well be more appropriate than formal education because they are less costly in time and money.