The value of a college degree, or lack thereof

April 3, 2015

Analyses have shown the importance of a college degree: with respect to cumulative career earnings, a typical bachelor’s degree graduate earns $1.19 million, twice what a typical high-school graduate earns, and $335,000 more than what a typical associate’s degree earns. What you major in is important as well. Engineers with B.S. degrees earn an average of just over $2 million over their careers.

So if more high-school graduates could just earn bachelor’s degrees, especially in fields like engineering, earnings would skyrocket and unemployment and wage inequality would drop, right? It turns out that the situation is more nuanced. In fact, there are some indications that a degree does not correlate with being good at coding—a highly sought-after skill.

Looking at the value of a college degree overall (not restricted to software engineering), Brad Hershbein, Melissa S. Kearney, and Lawrence H. Summers at Brookings have conducted empirical simulations of what would happen if one in ten men aged 25 to 64 instantly obtained a bachelor’s degree.

The researchers found that a degree would help the employment and earnings prospects of men who previously lacked a degree. (They focused on men because low-skilled men have seen the greatest declines in employment and wage opportunities.) And increasing education levels can reduce inequality within the bottom half of the earnings distribution. But 10% of men instantly attaining bachelor’s degrees would not significantly change overall earnings inequality.

The researchers write, “These observations will not come as a surprise to most labor economists. Those of us who argue for the imperative of increasing skills are not staking out that position because we believe it will close the gap between the rich and the middle—or between the exorbitantly rich and the merely rich. Rather, we take that position because higher levels of skills will improve the economic position of those around and below the middle of the current earnings distribution.”

Meanwhile, Christopher Mims at the Wall Street Journal cites a question posed by Harvard fellow and former White House economist Mike Rosenbaum: why should a “fancy degree” make someone a better candidate for a programming job that someone with better coding skills?

Rosenbaum built a big-data platform that has been comparing résumés with down-the-road job performance for 14 ears, processing 10,000 résumés per year. The result? Mims quotes Rosenbaum as saying, “We find no correlation between having a college degree and being a good software engineer.”

However, large companies have resisted abandoning “credentialism.” Consequently, Rosenbaum has taken to hiring the skilled but non-degreed coders himself and outsourcing their services to other companies. “In a way,” writes Mims, “the markup those clients pay for the coders’ labor is the price for not changing their minds about how to select the best candidates.”

Of course, there are other considerations. In the comments section to Mims’s article, Paul Adams places coders and software engineers at opposite ends of a spectrum, “with coders being to software what a cable installer is to a cable system designer.” And Gregory Reid noted that a coder can skip college if he or she never wishes to move to a more senior management position.

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