5 ms·

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 w

by 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.
  - dahart 7y ago
    There are two separate “premiums” calculated in the paper. One of them is income, and one of them is wealth (accumulated savings). Only the wealth premium is going to zero, the income premium is currently still quite high and is stable. Only the income premium matters to income taxes, the wealth premium that is going to zero does not affect income taxes directly in the short term. The only premium that the student loan program cares about in the short term is the income premium, and the income premium has not gone down. The question of why this all happens is indeed interesting and important, however not relevant to what I’ve been talking about here, that student loans are on balance repaid by the college income premium. In short, the college premium from the point of view of the government’s income is not the same as the college premium to the student. It’s possible for the government to see a favorable financial return on student loans at the same time the student sees negative value in their degree.

by xyzzyz 7y ago

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.
- dahart 7y ago
  There are two separate “premiums” calculated in the paper. One of them is income, and one of them is wealth (accumulated savings). Only the wealth premium is going to zero, the income premium is currently still quite high and is stable. Only the income premium matters to income taxes, the wealth premium that is going to zero does not affect income taxes directly in the short term. The only premium that the student loan program cares about in the short term is the income premium, and the income premium has not gone down. The question of why this all happens is indeed interesting and important, however not relevant to what I’ve been talking about here, that student loans are on balance repaid by the college income premium. In short, the college premium from the point of view of the government’s income is not the same as the college premium to the student. It’s possible for the government to see a favorable financial return on student loans at the same time the student sees negative value in their degree.