A few days ago I blogged about the NY Times article which gave very bad advice to prospective college students—that they should go to a less prestigious college that’s a better “fit.”
But in the comments to my post, people wondered if more prestigious schools really conferred any benefit.
A research paper by Stacy Berg Dale and Alan B. Krueger (1998) (link to pdf file) confirms that people who attended more prestigious schools earn more money. They looked only at students who were accepted to multiple colleges, so they were able to determine what happens if a student is accepted to a better school but attends a lesser school. From page 24:
Based on the straightforward regression results in column 1, men who attend the most competitive colleges [according to Barron's 1982 ratings] earn 23 percent more than men who attend very competitive colleges, other variables in the equation being equal.
23 percent is quite a bit of money, it’s almost like getting two college degrees instead of one!
They also discovered that there was a benefit to attending a more expensive school. The more expensive tuition resulted in a lifetime internal rate of return of 20% for men and 25% for women.
THE MOST MIS-CITED STUDY EVER?
Whenever this study has been cited, it has always been for the exact opposite of its actual conclusion. This typical article states that the study “dropped a bomb on the notion of elite-college attendance as essential to success later in life.”
A third finding of the study was that when colleges were rated based on average SAT score, students who attended a school with a lower average SAT score didn’t earn any less money. Everyone used this finding to say it doesn’t matter what school a student attends. But what it really says is that the average SAT score of a school is unimportant, what’s important is how highly “ranked” it is. I suspect that in many cases, when a student attended a school with a lower average SAT score, they did so because the school with the lower score was actually the more prestigious school.
This demonstrates a persistent bias in which the media only reports what people want to hear instead of reporting the truth. Parents want to know that they didn’t harm their kid by sending him to a state school instead of a more prestigious private school. Unfortunately, the reality is that sending your kid to a state school instead of the best private school he can get into does irreparable harm to his future career.
STUDENTS WITH HIGHER SAT SCORES EARN LESS MONEY
The regression analysis in the Dale & Krueger study had a coefficient for the person’s SAT score and a second for the square of the SAT score. Based on these two coefficients, earnings peaks at an SAT score of 1100. People who have an SAT score higher than 1100 earn less money.
I would find it hard to believe if I hadn’t discovered the same thing myself. Seeing the same result in a completely different dataset confirms that I didn’t do anything wrong.
It seems that the only benefit of high intelligence is that it gets you into a better college and graduate school. After you get your degrees, high intelligence is of no benefit in the labor market.
ATHLETES EARN MORE MONEY
The Dale & Krueger regression analysis also included a variable indicating if the person was an athlete. Those who were athletes earned more money. This also confirms my own findings from the General Social Survey.
A kid who gets accepted to Harvard because of his athletic ability, even though his SAT score is lower than most other Harvard students', and attends Harvard, will likely earn far more money over the course of his life than an unathletic kid with a perfect SAT score who attends a state school.
THOUGHTS ON THE IMPORTANCE OF COLLEGE
The more I study the subject, the more I come to the conclusion of the immense importance of a college degree and a graduate degree on a person’s future earnings. It’s almost as if a person’s whole life course is set when he walks out of college and begins working at his first job.