> we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added by college and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment
There is no doubt in my mind that someone’s parents’ status and education, and someone’s financial acumen, are both leading to higher incomes and wealth.
Why does it make sense to “control” for these things? Doesn’t this lead to a distorted view, where large real differences in income between two people are factored away?
Sure, financial acumen might be partly innate, or correlated with IQ or family status, but some people surely gain financial acumen precisely by going to college? Sure, parent’s education is a great predictor or ‘own education’, but does that really imply the alternative- that when the professor’s kid is a high school dropout that the kid is better off than other dropouts? Is that supported by the data? Maybe yes, because daddy prof has more money to support his kid, but what happens with the dropout’s kids and future generations?
I’m not arguing that the premium isn’t going down, it’s true that tuition is out of control, but I’m not sure I understand how the methodology here isn’t painting a starker picture than reality. Discounting 50% for ‘acumen’ is a huge influence on the numbers, and when you don’t discount for parents and acumen, the reality is that people with college degrees are earning a lot more actual money.
There is no doubt in my mind that someone’s parents’ status and education, and someone’s financial acumen, are both leading to higher incomes and wealth.
Why does it make sense to “control” for these things? Doesn’t this lead to a distorted view, where large real differences in income between two people are factored away?
Sure, financial acumen might be partly innate, or correlated with IQ or family status, but some people surely gain financial acumen precisely by going to college? Sure, parent’s education is a great predictor or ‘own education’, but does that really imply the alternative- that when the professor’s kid is a high school dropout that the kid is better off than other dropouts? Is that supported by the data? Maybe yes, because daddy prof has more money to support his kid, but what happens with the dropout’s kids and future generations?
I’m not arguing that the premium isn’t going down, it’s true that tuition is out of control, but I’m not sure I understand how the methodology here isn’t painting a starker picture than reality. Discounting 50% for ‘acumen’ is a huge influence on the numbers, and when you don’t discount for parents and acumen, the reality is that people with college degrees are earning a lot more actual money.