4 ms·

> Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively The original paper that this whole discussion is happ

by xyzzyz 7y ago

> Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively The original paper that this whole discussion is happening in the context of literally says that the college premium is very low, and for non whites practically zero. The whole issue is that society-wide, college education doesn’t increase the wages of people. Yes, the college educated people make much more than those without a degree, but the question is how much they’d make on average if those same people didn’t get a degree, and as the paper argues, only a little less if at all.

dahart 7y ago
No, income taxes are extracted before the premium is calculated. I’m not talking about the wealth premium that a degree gives you, I’m talking about the income taxes that the government extracts from people who have degrees, which is completely unaffected by the recent downward trend in the wealth premium that this paper is calculating. This is a case where the absolute, uncontrolled data is very important to differentiate from the adjusted, controlled data.
- sokoloff 7y ago
  What the “other” side is arguing is that if you’re using these income taxes as justification for the government backed loans because those loans allow the attendance of college, then it matters whether or not those same people going directly into the workforce, starting working 4 years earlier, and using their talent and ambition would end up paying a similar or greater amount of income tax. In short, you’re saying only the outcome matters and they’re saying the outcome might not be caused by college attendance.
  - dahart 7y ago
    I’m not saying that only the outcome matters, I’m saying that the government’s financial investment on the student loan program is seeing high positive returns right now, despite the default rate on those loans.
    - sokoloff 7y ago
      Because you’re calculating that the income levels attained (and income taxes paid) by the specific cohort who attended college are caused by their attendance, rather than merely correlated with it. If they’re caused, the program should take credit for the returns on that investment. If that cohort of people (generally more ambitious, societal/educational rule following, and possibly more intelligent [at least more “book smart”] than the national median of college non-attendees) would have earned enough to pay the same income tax anyway, those gains cannot be ascribed to the government student lending.
      - dahart 7y ago
        I’m not arguing causation, and I’d be happy rephrasing to say that the investment sees returns precisely because higher income taxes are strongly correlated with degrees. What causes attendance is important to the question of whether investment in college is a return from the point of view of the student, but it’s not particularly important from the point of view of the government and whether the student loan program is paying off today. Whether the government is seeing returns is not a causation vs correlation issue, it’s just a fact. I’m looking at the raw data, not through the lens of a model that discounts absolute income & savings differences to try to answer a hypothetical question about what college is worth to the individual. In the case of income & taxes, it’s important in this particular case (that of student loans and income taxes) to look at the raw unadjusted income, because that is what the government sees. It doesn’t matter if tuition is cutting into graduates’ savings, because the government gets it’s income taxes before people get a chance to save (or even spend!). Your second point is hypothetical, since studies trying to control for IQ and parents’ education and all the other factors we can think of are still showing positive economic returns for college graduates. This paper is asking the question, ‘how can we calculate the return on investment in college’ from the point of view of a student, and trying to rule out factors that give you more income without going to college. However, that is not the same thing as asking ‘what would happen if everyone stopped going to college?’.
- xyzzyz 7y ago
  I’m sorry, but what you’re saying here doesn’t make sense. If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same. It could be that in that scenario different people would make these wages than now, as the distortionary effect of college wouldn’t then deprive them of it in favor of some graduate from better school, but from the taxman point of view, it doesn’t really matter. Education only adds value to the society if it allows graduates to do jobs that otherwise couldn’t be done without education. For example, surgeons require lots of education to do their jobs. If nobody educated surgeons, those jobs wouldn’t be done. Thus, educating surgeons does increase tax receipts. On the other hand, education obtained in an MBA degree isn’t really obligatory to do the job that MBAs typically do. If nobody got MBA, those management positions would be filled anyway, potentially by different people. This way, MBA is zero sum and has no benefit for society, though it does benefit the individuals who obtain it. Government doesn’t earn extra tax from educating MBAs, MBA programs just determine who will be paying that tax.
  - dahart 7y ago
    > If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same. No, that’s not true, you’re missing a very important point. Taxes come out of income, they aren’t extracted after you control for everything, they are extracted on your income, and the income for 4-year degree holders is 2x the income of non-degree holders on average.
    - xyzzyz 7y ago
      You keep missing what I’m saying. Sure, the degree holders make much more, but the real question is, why they make more. Do they make more because they learned valuable skills allowing them to do valuable jobs that otherwise wouldn’t be done? Then yes, the government extracts part of the extra productivity they generate that wouldn’t have been generated but for the education. Or maybe do they make more because the college degree certifies them as quality people, which signals their value as good workers, leading to employers choosing them over other people? In that case, college education doesn’t make the workers any more productive. No extra value is produced because of college education. However, the college educated workers in that world still make more than not educated workers. All college does then is to determine who gets to do the higher income jobs. If nobody went to college in that world, those exact same jobs would be done anyway, it’s just employers would have to use different signals for employee quality than college degree. I believe that our world is much closer to the latter than to the former. College is mostly quality certification to signal value, and it’s not building human capital through teaching people skills that make them more productive. This is shown by papers like above, where they find that after controlling for other explanatory variables, college premium is zero or close to zero, but also by common sense: a typical college graduate forgets 95% of the material in class, and the remaining 5% is often not likely to be used anyway, since most degrees are not teaching any practical work skills anyway (except for the job of being a college professor), and on top of that a lot of people don’t even work in a job they have a degree for.

by xyzzyz 7y ago

dahart 7y ago

No, income taxes are extracted before the premium is calculated. I’m not talking about the wealth premium that a degree gives you, I’m talking about the income taxes that the government extracts from people who have degrees, which is completely unaffected by the recent downward trend in the wealth premium that this paper is calculating. This is a case where the absolute, uncontrolled data is very important to differentiate from the adjusted, controlled data.

sokoloff 7y ago
What the “other” side is arguing is that if you’re using these income taxes as justification for the government backed loans because those loans allow the attendance of college, then it matters whether or not those same people going directly into the workforce, starting working 4 years earlier, and using their talent and ambition would end up paying a similar or greater amount of income tax. In short, you’re saying only the outcome matters and they’re saying the outcome might not be caused by college attendance.
- dahart 7y ago
  I’m not saying that only the outcome matters, I’m saying that the government’s financial investment on the student loan program is seeing high positive returns right now, despite the default rate on those loans.
  - sokoloff 7y ago
    Because you’re calculating that the income levels attained (and income taxes paid) by the specific cohort who attended college are caused by their attendance, rather than merely correlated with it. If they’re caused, the program should take credit for the returns on that investment. If that cohort of people (generally more ambitious, societal/educational rule following, and possibly more intelligent [at least more “book smart”] than the national median of college non-attendees) would have earned enough to pay the same income tax anyway, those gains cannot be ascribed to the government student lending.
    - dahart 7y ago
      I’m not arguing causation, and I’d be happy rephrasing to say that the investment sees returns precisely because higher income taxes are strongly correlated with degrees. What causes attendance is important to the question of whether investment in college is a return from the point of view of the student, but it’s not particularly important from the point of view of the government and whether the student loan program is paying off today. Whether the government is seeing returns is not a causation vs correlation issue, it’s just a fact. I’m looking at the raw data, not through the lens of a model that discounts absolute income & savings differences to try to answer a hypothetical question about what college is worth to the individual. In the case of income & taxes, it’s important in this particular case (that of student loans and income taxes) to look at the raw unadjusted income, because that is what the government sees. It doesn’t matter if tuition is cutting into graduates’ savings, because the government gets it’s income taxes before people get a chance to save (or even spend!). Your second point is hypothetical, since studies trying to control for IQ and parents’ education and all the other factors we can think of are still showing positive economic returns for college graduates. This paper is asking the question, ‘how can we calculate the return on investment in college’ from the point of view of a student, and trying to rule out factors that give you more income without going to college. However, that is not the same thing as asking ‘what would happen if everyone stopped going to college?’.
xyzzyz 7y ago
I’m sorry, but what you’re saying here doesn’t make sense. If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same. It could be that in that scenario different people would make these wages than now, as the distortionary effect of college wouldn’t then deprive them of it in favor of some graduate from better school, but from the taxman point of view, it doesn’t really matter. Education only adds value to the society if it allows graduates to do jobs that otherwise couldn’t be done without education. For example, surgeons require lots of education to do their jobs. If nobody educated surgeons, those jobs wouldn’t be done. Thus, educating surgeons does increase tax receipts. On the other hand, education obtained in an MBA degree isn’t really obligatory to do the job that MBAs typically do. If nobody got MBA, those management positions would be filled anyway, potentially by different people. This way, MBA is zero sum and has no benefit for society, though it does benefit the individuals who obtain it. Government doesn’t earn extra tax from educating MBAs, MBA programs just determine who will be paying that tax.
- dahart 7y ago
  > If, after controlling, college premium is zero, it means that if nobody at all went to college, the wages and thus also the tax receipts would be the same. No, that’s not true, you’re missing a very important point. Taxes come out of income, they aren’t extracted after you control for everything, they are extracted on your income, and the income for 4-year degree holders is 2x the income of non-degree holders on average.
  - xyzzyz 7y ago
    You keep missing what I’m saying. Sure, the degree holders make much more, but the real question is, why they make more. Do they make more because they learned valuable skills allowing them to do valuable jobs that otherwise wouldn’t be done? Then yes, the government extracts part of the extra productivity they generate that wouldn’t have been generated but for the education. Or maybe do they make more because the college degree certifies them as quality people, which signals their value as good workers, leading to employers choosing them over other people? In that case, college education doesn’t make the workers any more productive. No extra value is produced because of college education. However, the college educated workers in that world still make more than not educated workers. All college does then is to determine who gets to do the higher income jobs. If nobody went to college in that world, those exact same jobs would be done anyway, it’s just employers would have to use different signals for employee quality than college degree. I believe that our world is much closer to the latter than to the former. College is mostly quality certification to signal value, and it’s not building human capital through teaching people skills that make them more productive. This is shown by papers like above, where they find that after controlling for other explanatory variables, college premium is zero or close to zero, but also by common sense: a typical college graduate forgets 95% of the material in class, and the remaining 5% is often not likely to be used anyway, since most degrees are not teaching any practical work skills anyway (except for the job of being a college professor), and on top of that a lot of people don’t even work in a job they have a degree for.