CHAPTER 5
Career and Economic Impacts of College
In this
chapter we summarize the accumulated evidence on the career and economic
impacts of college. Overall, the labor
market impacts of postsecondary education have remained substantial during the
decade of the 1990s; and this fact has not been lost on students about to
graduate from high school. For example,
of the 2.7 million American high school graduates in 1996, nearly two-thirds
(65%) went on to some type of postsecondary education (College
continuation rates for recent high school graduates reached record high in
1996, 1997, August). Moreover,
the reasons for attending college appear to be strongly linked to a perception
that a college degree gives one decided economic and career advantages. According to the 1997 survey of American
college freshmen by the Higher Education Research Institute at UCLA, nearly
three-fourths said that getting a better job (74.6%) and making more money
(73.0%) were the most important reasons for attending college (see also,
Flacks & Thomas, 1997; Is college still worth the cost? The private investment
value of higher education 1967 to 1996, 1998, March). We examine these labor market or occupational
attainment impacts in considerable detail, but we also look at the evidence
pertaining to other dimensions of career such as career maturity, career
progression and success, and job satisfaction.
By definition, of course, a large part of the evidence on the career and economic impacts of college concerns long-term or extended impacts. Consequently, we do not include a separate section on long-term effects in this chapter. Rather, we synthesize the evidence on such effects, where appropriate, within our other five sections.
Change During
College
Conclusions from
A consistent body of evidence suggests that students become significantly more mature, knowledgeable, and focused during college in thinking about planning for a career. Whether this is an effect of college or simply a development that occurs coincidentally with college attendance is difficult to determine. The simple fact of having to confront one’s life work may have a substantial impact on the increased maturity found in seniors’ thinking and planning for a career.
Evidence from the 1990s
The small body of evidence from the 1990s is quite consistent with our 1991 conclusion that students become more mature, knowledgeable, and focused during college in thinking about a career. For example, Luzzo (1990; 1993) sought to determine if undergraduate class standing was related to scores on a standardized measure of career maturity. Career maturity was defined as the readiness of an individual to make informed, age-appropriate career decisions and cope with appropriate developmental tasks (Savickas, 1990). Although the statistically significant relationship was not particularly strong, Luzzo found that the more advanced one’s undergraduate class standing, the higher one’s level of career maturity. While they employ different measures than Luzzo, similar results have been reported by Bowman and Tinsley (1991) for vocational realism, by Poe (1991) for stability of vocational identity and need for occupational information, and by VanHaveren, Winterowd, and Fuqua (1999) for career decidedness. Furthermore, there is also evidence to suggest that college seniors have a more accurate perspective about labor-market realities than do students in the first two years of college. Two studies indicate that seniors have significantly lower and more realistic estimates of actual starting salaries for college graduates than either freshmen (Heckert & Wallis, 1998) or sophomores (Shepperd, Oullette, & Fernandez, 1996).
Despite the consistent evidence, interpreting such differences in career maturity, career identity, and vocational/labor-market realism as an impact of college is problematic. Simple maturation or, as we suggested in our previous synthesis, the increased pressure on seniors to reach closure on career decisions may be equally valid as competing explanations for the findings.
In addition to focusing on the
different dimensions of career maturity or career identity, other research has
examined the extent to which college students are prepared to meet workplace
requirements. This work was conducted by
the Collegiate Employment Research Institute at Michigan State University (Gardner, 1998). A simulation-based assessment of a real
workplace situation was developed that tapped individuals’ competencies in such
areas as applied problem solving, interpersonal effectiveness, and
accountability. The instrument was
normed on a group of recent college graduates evaluated as performing above
average on a common job-assessment instrument.
Consistent with the evidence on career maturity, college seniors tended
to have the highest overall workplace readiness scores, while freshmen had the
lowest.
The Gardner (1998) study not only reports the relative standing of freshmen, sophomores, juniors, and seniors in workplace readiness, it also provides an absolute estimate. As alluded to above, the workplace readiness assessment produced a normed score for employed college graduates who have been evaluated as performing above average on the job. This normed score was substantially above that of the average college seniors, suggesting that, while they are more proficient than those with less exposure to college, seniors may often lack an absolute level of job skills required for above average job performance. Corroborating evidence is suggested in an additional survey of employers who first specified the absolute skill or performance levels new graduates should be expected to meet upon entry into their jobs, and then indicated the level of preparedness of college graduates they observed. While students generally appeared to be well prepared in their academic and content areas, they fell short in areas that were related to the context of work (e.g., interpersonal skills, setting priorities) and applying their knowledge in work environments (Gardner, 1998; see also Candy & Crebert, 1991; O'Brien, 1997; Van Horn, 1995).
Net Effects of College
Conclusions from
Attaining a bachelor’s degree has important implications for the type of job one obtains and for an individual’s lifetime earnings. Our best estimates were that, net of an individual’s background and other confounding influences, a bachelor’s degree (compared to a high school diploma) conferred about a 34 percentile point advantage in occupational status or prestige, a 20 to 40% advantage in earnings, and a private rate of return of between 9.3 and 10.9%. The occupational status advantage that accrued to college graduates was not simply a function of the first job obtained. Rather, the significant occupational status differences between high school and college graduates were sustained over the occupational life span, even when the status of one’s first job is taken into account. For both occupational status and earnings, there was a credentialing effect. One received a “bonus” for completing the bachelor’s degree above and beyond the increment in job status or earnings received for every year of postsecondary education.
The fact that a bachelor’s degree significantly enhanced the likelihood of entering relatively high status managerial, technical, and professional occupations has implications not only for earnings, but also for occupational stability. The very nature of jobs entered by college graduates (versus high school graduates) tended to make them less sensitive to employment fluctuations that occur with changing economic conditions. This may at least partially explain why college graduates were substantially less likely than high school graduates to be unemployed. Related evidence also suggested that college-educated individuals may have additional hedges against prolonged periods of unemployment in the form of increased accuracy of occupational information and efficiency in job search, increased regional mobility to take advantage of employment opportunities, and an increased network of personal contacts, some of which date back to college days.
Despite
the fact that one derived substantial occupational status and earnings
advantages from a bachelor’s degree, irrespective of his or her background
characteristics, the causal mechanism(s) underlying the ability of a bachelor’s
degree to confer these advantages was (were) not readily apparent. On the one hand, we found evidence to support
a socialization or human capital explanation.
That is, college imparts cognitive skills, values, attitudes, and
behavioral patterns that make the individual more productive in complex
technical, professional, and managerial occupations, and therefore more highly
paid. On the other hand, we also found
evidence supporting a screening or certification explanation. This explanation posits that a college degree
serves a screening or certification function such that those without a
bachelor’s degree are effectively barred from entry into high status/high
income careers. If college-educated
individuals are perceived by employers as more likely than high school
graduates to possess the requisite competencies and values necessary for
successful adaptation to complex technical and managerial positions, they will
continue to secure higher-status and better paying jobs irrespective of whether
the competencies and values were acquired in college. Our reading of the total body of evidence was
that both socialization/human capital and screening/certification may be part
of any causal link between postsecondary education and both occupational status
and earnings. Neither hypothesis alone
provided a completely satisfactory explanation.
College
tended to produce conflicting influences on satisfaction with one’s work. On the one hand, college tended to have a
modest positive influence on job satisfaction by placing individuals in jobs
with relatively high intrinsic (autonomy, challenge, interest) and extrinsic
(income) rewards. On the other hand,
college tended to develop a capacity for critical judgment and evaluation that
may make college-educated individuals more sensitive to the shortcomings of
their jobs. Similarly, the college-educated
were also quite likely to have higher expectations about the intrinsic rewards
of their jobs than those with less education.
The latter factors can lead to dissatisfaction in situations of
“overeducation,” where job demands do not require a college-level education.
Evidence
from the 1990s on the net career and economic impacts of college differs
somewhat in focus from the evidence we reviewed from our 1991 synthesis. In our present synthesis we found
substantially less evidence on such topics as occupational productivity, job
satisfaction, and job success, but substantially more on the economic returns
to different levels of postsecondary education.
In reviewing this evidence, we have had the benefit of several excellent
literature reviews (e.g.,
Boesel & Fredland, 1999; Grubb, 1998, August; Paulsen, 1998), which has made the
locating of studies and the development of this chapter substantially
easier. Still, the body of evidence is
extensive. Thus, in an attempt to
provide some organizing structure we present the evidence in the following
categories: occupational status, workforce participation, job
satisfaction/performance, earnings, credentialing effects, private rate of
return, and causal mechanisms.
Occupational
status can be generally regarded as a hierarchy of occupations that reflects
their prestige or desirability. Not
surprisingly, perceived occupational prestige or desirability in the United
States has an overwhelming socioeconomic basis consisting largely of education
and income (Stevens
& Featherman, 1981). Typically, an
occupation’s status, or Socio-Economic Index (SEI) score, depends on the
percentage of individuals working in that occupation who have completed a
certain level of formal education or higher and the percentage with incomes at
a certain level or higher. Since an
occupation’s SEI score is a function of its educational requirements, it would
seem, on first consideration, that any association between formal education and
occupational status is largely tautological.
This probably overstates the case, however. The link between formal education and
occupational status reflects a real social phenomenon that has implications for
the cognitive complexity and desirability of the work, the social position of
those who engage in the work, and their children’s life chances (Jencks et
al., 1979; Pascarella & Terenzini, 1991).
We
uncovered only a small body of studies published in the 1990s that focused on
the impact of postsecondary educational attainment on occupational status. The results of this research are quite
consistent with the evidence from our previous synthesis, but the data sets
analyzed are somewhat dated. Two studies
(Knox, Lindsey, & Kolb, 1993[1]; Lin
& Vogt, 1996) analyzed the 1986 follow-up of the National Study of the High
School Class of 1972 (NLS-72), and one study (Kerckhoff
& Bell, 1998) used the
1986 follow-up of the 1980 High School and Beyond (HS&B) data. An additional study by Lavin and Hyllegard (1991) analyzed a
single-institution sample of 1970-72 graduates followed up in 1984. What the evidence from these studies suggests
is that: 1) a bachelor’s degree provides occupational status advantage over a
high school degree of about .95 of a standard deviation (33 percentile points);
2) an associate’s degree confers an estimated occupational status advantage
over a high school degree of between .24 and .44 of a standard deviation (9 to
17 percentile points); and 3) other amounts of postsecondary education or
sub-baccalaureate credentials such as a vocational degree or a license/certificate
provide an estimated occupational status advantage over a high school diploma
of between .12 and .22 of a standard deviation (5 to 9 percentile points). All of these occupational status advantages
over those conferred by a high school degree are statistically significant and
persist even in the presence of statistical controls in different studies for
such influences as family socioeconomic status, sex, race, high school
achievement, standardized test scores, educational aspirations, and
occupational aspirations.[2] Thus, while a bachelor’s degree appears to
confer the largest incremental advantage in occupational status compared to a
high school diploma, the evidence from the 1990s suggests that various forms of
sub-baccalaureate post-secondary education also provide modest but
statistically significant occupational status advantages.
Consistent
with the conclusions from our previous synthesis, evidence from the 1990s
clearly suggests that the bachelor’s degree not only increases the likelihood
of entering relatively high status technical and professional occupations, it
also increases the likelihood of holding a job that provides relative
occupational stability. Compared to high
school graduates, those with a bachelor’s degree are substantially more likely
to participate in the labor force and are substantially less likely to be
unemployed (Blau,
Ferber, & Winkler, 1998; Grubb, 1998, August; Office of Education Research
and Improvement, 1996; Paulsen, 1998; U.S. Department of Education, 1992; Veum
& Weiss, 1993). For example, data from the U.S. Bureau of the
Census indicated that in 1996 about 84.7% of all bachelor’s degree holders age
25-64 were employed, or participated in the workforce, while the corresponding
rate for those with a high school diploma was 74.6%. Conversely, the 1996 unemployment rate for
bachelor’s degree holders was 2.4%, less than half that for those with a high
school degree, 4.7% (Employment
and unemployment rates by educational attainment 1970 to 1996, 1997, August).
Although
they are less dramatic in magnitude, similar differences exist between high
school graduates and those with sub-baccalaureate degrees or credits in
postsecondary education (Blau et
al., 1998; Grubb, 1998, August; Veum & Weiss, 1993). Using the same 1996 Census data, the
workforce participation rates were: 82.3% for those age 25 to 64 with an
Academic Associate’s degree, 83.9% for those with a Vocational Associate’s
degree, 79.4% for those with some postsecondary education credits but no
degree, and 74.6% for those with a high school diploma. The unemployment rates were: Academic
Associate’s degree = 3.2%, Vocational Associate’s degree = 3.3%, some
postsecondary education credits but no degree = 4.0%, and high school diploma =
4.7% (Employment
and unemployment rates by educational attainment 1970 to 1996, 1997, August).
Of
course, such findings do not necessarily reflect the net impact of a
postsecondary degree completed or postsecondary credits taken. Rather, they may simply represent
employability-related differences in the intellectual or personal
characteristics of individuals with varying levels of formal education. We uncovered two studies that addressed this
issue with nationally representative data.
Lewis, Hearn, and Zilbert (1993) analyzed the 1986 follow up
of the High School and Beyond data base to determine if postsecondary
vocational training influenced participation in the labor force and number of
months employed. Net of controls for
such factors as race, gender, academic ability test scores, secondary school
grades, socioeconomic background, and high school program, neither
participation in vocational training nor completing a vocational
training program significantly influenced either measure of workforce
participation. Consistent findings are
reported by Surette (1997) in analyses of 12 years of
data (1979-1990) for men from the National Longitudinal Study of Youth. Net of controls for ability test scores,
labor market experience, and age, the completion of sub-baccalaureate vocational
training had only small and nonsignificant effects on both the probability of
being employed and annual hours worked.
However, both the number of community-college credits completed, and the
number of four-year college credits completed had a significant positive effect
on the probability of employment. The
number of four-year college credits completed and the completion of a
bachelor’s degree had significant positive effects on annual hours worked. Thus, there is a modicum of support for the
hypothesis that the relationship between amount of formal postsecondary
education and workforce participation is causal and not simply attributable to
the characteristics of individuals who acquire different amounts of
postsecondary credits or degrees.
Although
it is possible that we may have missed some studies, our literature search for
the present synthesis uncovered relatively little evidence on job satisfaction
and job performance. What evidence we
did uncover, however, is consistent with our previous synthesis in suggesting
that postsecondary education tended to produce conflicting, or at least complex
influences on satisfaction with one’s work.
It is clear that having a college degree increases the likelihood that
one will be engaged in work that not only provides higher levels of extrinsic
rewards (e.g., prestige and income), but which also offers greater intrinsic
rewards (e.g., complexity, autonomy, managerial authority, ideational content,
nonroutine tasks, and sense of control over one’s work) (Grubb,
1998, August; Hyllegard & Lavin, 1992; Kohn et al., 1990; Ross &
Reskin, 1992). Indeed, net of academic ability,
socioeconomic background, race, and gender, increasing one’s level of
postsecondary education appears to increase the importance of such intrinsic
work values (Knox et
al., 1993). Having a college education tends to have a
positive indirect effect on job satisfaction through its impact on such factors
as job prestige and earnings, job autonomy, and nonroutine work. However, net of those factors, the direct
effect of having a college degree on job satisfaction tends to be negative,
possibly because education functions to raise workers’ expectations (Ross &
Reskin, 1992). There is also evidence indicating that when
college graduates hold jobs that do not typically require a college degree,
such “over-education” can have a negative effect on job satisfaction (Jenkins,
1992). Part of this negative effect may be because
college graduates have higher expectations of the intrinsic characteristics or
returns of work than those of their actual job (Jenkins,
1992), while
another part may be attributable to the negative influence of over-education on
the extrinsic rewards of work, such as earnings (Verdugo
& Verdugo, 1989).
We
also uncovered little research on the influence of postsecondary education on
job performance. Hill (1989) surveyed nearly 190
employers in Pennsylvania to determine the effects of postsecondary education
on the performance of over 500 employees in six technical occupations: computer
programmers, EDP equipment operators, electrical/electronics engineering
technicians, mechanical engineering technicians, drafters, and surveying
technicians. In the employee sample, 32%
had a high school degree, 17% had a bachelor’s degree, and 51% had some
postsecondary education. With
statistical controls for the number of employees in the company and the type of
industry, workers with some postsecondary education or a bachelor's degree
tended to display statistically significant performance advantages—performing
better when starting work and requiring a shorter training period. They were also more likely to be
promoted. While such evidence suggests
that postsecondary education improves job performance, it should be cautioned
that the job classifications in the Hill study often do not typically require a
bachelor’s or even an associate’s degree.
Whether the same results would hold in higher level managerial or
professional positions is not clear. We
uncovered little consistent evidence in our 1991 synthesis to suggest job
productivity differences when college-educated and noncollege-educated
individuals hold the same job, although the former may have greater career
mobility. Furthermore, it is difficult
to attribute the findings of Hill’s study to the influence of postsecondary education. Since no controls were made for employee
background characteristics, the findings could just as easily be attributed to
differential recruitment. As compared to
their counterparts with high school degrees, those with exposure to
postsecondary education may simply possess more of the personal characteristics
that contribute to effective job performance to begin with.
Earnings
in the
If
one considers the premium to a bachelor’s degree simply as the average earnings
of individuals with a bachelor’s degree relative to the average earnings of
those individuals with a high school degree, expressed as a percentage, then it
is reasonably clear that the premium to a bachelor’s degree in the United
States has increased during the last part of the twentieth century (Boesel
& Fredland, 1999; Bound & Johnson, 1992; Freeman, 1994; Grogger &
Eide, 1995; Katz & Murphy, 1992; Levy & Murnane, 1992; Murphy &
Welch, 1992a; Pencavel, 1991). This increase is clearly illustrated in
Current Population Survey data from the Census Bureau for the average annual
earnings of men and women 25 and older (Is college
still worth the cost? The
private investment value of higher education 1967 to 1996, 1998, March). For the five-year period of 1967-71, male and
female bachelor’s degree holders had an average annual earnings advantage
(unadjusted for inflation) of 48.5% over their counterparts with a high school
diploma. (In other words, for this
five-year period the average annual earnings of those with a bachelor’s degree was 1.485 times as large as those with a high school
diploma.) In contrast, for the five-year
period 1992-96, men and women with a bachelor’s degree had an average annual
earnings advantage of 79.8% over men and women with a high school degree. The only aberration in this steady increase
over time in the college premium has been a downtrend in the 1970s, which paralleled
the arrival of the “baby boomer” cohorts into the U.S. labor market (Berger,
1989; Boesel & Fredland, 1999; Murphy & Welch, 1992a, 1993). Indeed, for the five-year period from 1974-79
college graduates as a group were only earning 43% more than those with a high
school diploma (Is college
still worth the cost? The private investment
value of higher education 1967 to 1996, 1998, March).[3],
[4]
Of
course it is doubtful that the total earnings premium associated with a
bachelor’s degree (versus a high school degree) is entirely attributable to
college attendance. Compared to high school
graduates, individuals who attend and graduate from college may simply possess
more of the cognitive skills and personal attributes that lead to success and
high earnings in complex managerial and technical jobs to begin with. A body of research in the 1990s has attempted
to estimate the net earnings premium of a bachelor’s degree (versus a high
school degree) by introducing various statistical controls for differences
among individuals that might confound the relationship between level of formal education
and earnings (Cancio,
Silva, Evans, & Maume, 1997; K. Gray, Huang, & Jie, 1993; Groot,
Oosterbeck, & Stern, 1995; Grubb, 1995b, 1996, 1997; 1998, August;
Hollenbeck, 1993; T. Kane & Rouse, 1993, 1995a, 1995b; Knox et al., 1993;
Leigh & Gill, 1997; Rivera-Batiz, 1998; Surette, 1997). The data sets employed in these analyses have
been: the National Longitudinal Study of the High School Class of 1972 (1986
follow-up); the National Longitudinal Study of Youth (1976 through 1983 high
school graduates followed up in 1989, 1990, and 1993); the 1992 National Survey
of Adult Literacy; the 1985 wave of the Panel Study of Income Dynamics; and the
1984, 1987, and 1990 cohorts from the cross-sectional Survey of Income and
Program Participation, which includes individuals between the ages of 25 and
64. In these analyses, statistical
controls were made for important confounding variables such as race,
socioeconomic background, secondary school grades, ability (as measured by
standardized test scores), age, job experience, job training, marital status,
and the like (depending on the data set analyzed). Taking the results from these published and
unpublished studies, we estimate that the average net annual earnings premium
for a bachelor’s degree (versus a high school diploma) is about 37% for men and
about 39% for women. The hourly wage
premium is about 28% for men and about 35% for women.[5],
[6] Such average estimates fall at the upper end
of our 1991 estimates of a net earnings premium for a bachelor’s degree of
between 20-40%. This finding perhaps
reflects the increase in the size of the earnings premium for a bachelor’s
degree in the 1980s and 1990s.[7]
One
of the major contributions of the literature of the 1990s has been its concern,
not only with the economic payoff of obtaining a bachelor’s degree from a
four-year institution, but also with estimating the net earnings premium for
different levels of sub-baccalaureate education. The focus of this concern has been primarily
on the payoff to an associate’s degree from a community college, but attention
has also been paid to the returns to vocational certificates and to
postsecondary credits or vocational training completed without a degree or
certificate. The research was largely
silent with respect to the economic returns to sub-baccalaureate education in
our previous synthesis. Not
surprisingly, much of the important evidence in this area was uncovered in the
same studies, cited above, that estimated the net premium to a bachelor’s
degree with nationally-representative samples (Groot et
al., 1995; Grubb, 1995a, 1996, 1997, 1998, August; Hollenbeck, 1993; T. Kane
& Rouse, 1993, 1995a, 1995b; Leigh & Gill, 1997; Rivera-Batiz, 1998;
Surette, 1997). Additional evidence on the net premium to
sub-baccalaureate education is provided in investigations by Grubb (1992a), Kerckhoff and Bell (1998), and Lin and Vogt (1996). Evidence yielded by the total body of studies
comes from analyses of: the 1986 follow-up of 22 to 24 year olds in the 1980
High School and Beyond sample; the 1992 National Survey of Adult Literacy; the
1986 follow-up of the National Longitudinal Study of the High School Class of 1972;
the National Longitudinal Study of Youth (1976 through 1983 high school
graduates followed up in 1989, 1990, and 1993); and the 1984, 1987, and 1990
cohorts of individuals 25-64 years of age from the cross-sectional Survey of
Income and Program Participation.
Depending on the individual study, statistical controls were introduced
for such factors as: race, socioeconomic origins, secondary school grades and
program type, ability (as measured by standardized test scores), mental status,
age, job experience, job training, and the like.
With
a few exceptions, the majority of the estimates of the net economic premium
attributable to an associate’s degree were statistically significant. Aggregating the evidence across all of the
above studies, we estimate that the average net annual earnings premium for an
associate’s degree (compared to a high school diploma) is about 17.5% for men
and about 27% for women. The hourly wage
premium is about 13% for men and 22% for women.[8],
[9] These estimates are somewhat smaller than the
typical earnings premium for an associate’s degree, unadjusted for confounding
influences. For example, Grubb (1996) provides the mean annual
earnings for individuals age 25-64 in the years 1984, 1987, and 1990 of the
Survey of Income and Program Participation; and corresponding earnings figures
for the years 1995 and 1996 are provided by the Current Population Survey (Is college
still worth the cost? The
private investment value of higher education 1967 to 1996, 1998, March). Across all five years, men with an
associate’s degree had an annual earnings advantage of 27% over men with a high
school degree, while the corresponding advantage for women with an associate’s
degree was 40%. Still, the net economic
returns to an associate’s degree from a community or two-year college represent
substantial earnings advantages over a high school diploma for both men and
women (Grubb,
1998, August; Paulsen, 1998). Furthermore, as suggested by Leigh and Gill’s
(1997) analyses of the National
Longitudinal Study of Youth data through the 1993 wave respondents, the
positive returns to an associate’s degree are essentially the same size for
experienced adult workers who return to school as they are for continuing high
school graduates.
There
is also a small body of evidence that estimates the economic returns to
postsecondary certificate programs.
Certificate programs, as described by Grubb (1998,
August), are
typically one year in length and focus on occupational rather than academic
preparation or general education. The
certificate is a common credential in vocational and proprietary schools. While the weight of evidence suggests that
they can increase earning power, particularly for women, the average net
economic returns to such certificates (compared to a high school diploma)
appear to be somewhat less certain, and probably smaller, than the average net
returns to associate’s degrees. As
reviewed by Grubb (1998,
August), analyses
of the 1986 follow-up of the National Longitudinal Study of the High School
Class of 1972 (Hollenbeck,
1993) and the
1992 National Adult Literacy Survey (Rivera-Batiz,
1998) found only
small and statistically nonsignificant effects of certificates for both men and
women. On the other hand, Grubb’s (1997) analyses of the 1984, 1987,
and 1990 cohorts of the Survey of Income and Program Participation found
statistically significant, positive earnings effects of certificates for women
across all three years. The effects for
men were positive and statistically significant in 1984 and 1987, but small and
nonsignificant in 1990. Results
generally consistent with those of Grubb (1997) are also reported by
Kerckhoff and Bell (1998) and Surette (1997). Analyzing the 1986 follow-up of the 1980 High
School and Beyond data, Kerckhoff and
Finally,
the 1990s have seen a concern with estimating the net economic premium (compared
to a high school diploma) of having different amounts of postsecondary
education without completing a degree or credential (e.g.,
Grubb, 1995a, 1997; Hollenbeck, 1993; T. Kane & Rouse, 1995b; Knox et al.,
1993; Leigh & Gill, 1997; D. Lewis et al., 1993; Rivera-Batiz, 1998;
Surette, 1997). As previously described, each of these investigations
analyzes national samples, and introduces statistical controls for salient
confounding influences. This research
has been concisely reviewed by several scholars (Boesel
& Fredland, 1999; Grubb, 1998, August; Paulsen, 1998). Their syntheses of the evidence would suggest
the following generalizations. First,
individuals can potentially increase their earnings in the labor market by
obtaining modest amounts of postsecondary education or vocational training
without obtaining a degree or certificate.
However, the average economic premium appears to be less certain and
smaller in magnitude than the average economic premium yielded by completing an
associate’s degree or a vocational certificate.
Second, the size of the premium depends substantially on what subject
matter one takes. (As we shall see in
the subsequent section of this chapter on within-college effects, this second
point also holds for a bachelor’s and an associate’s degree.) Third, a year of full-time enrollment can
lead to a net increase in earnings over a high school diploma of about 5% or
more; and the payoff of completing a year of academic credits at a community
college appears to be at least equal to, if not larger than, the payoff of
completing the same number of credits at a four-year college. Fourth, and finally, while there appears to
be a statistically significant return to taking a year’s worth of credits at a
community college, it is unclear that any real benefit is derived from taking
small numbers of community college credits (e.g., one or two courses).[10]
In our 1991 synthesis, we uncovered a small body of evidence suggesting that one receives an earnings “bonus” for completing the bachelor’s degree above and beyond the economic return for having the equivalent of four years of college (e.g., 120 credits) but not completing a bachelor’s degree. The economic literature often refers to this additional earnings increment associated with completing a degree as a “sheepskin effect” or a “credentialing effect” (e.g., Arkes, 1999; Belman & Heywood, 1991; Jaeger & Page, 1996). Others (e.g., Grubb, 1997, 1998, August) use the term “program effect” to indicate that a degree represents a coherent sequence of courses in a field of study or discipline, as well as a program of general education. Regardless of the descriptive term employed, the research of the 1990s not only presents substantially more evidence concerning the credential or program effect attributable to obtaining a bachelor’s degree, it also estimates the corresponding credential/program effect linked to sub-baccalaureate degrees and certificates.
Estimating the credential/program effect of different postsecondary degrees and certificates has been largely the concern of economists (Arkes, 1999; Belman & Heywood, 1991; Frazis, 1993; Grubb, 1996, 1997, 1998, August; Heywood, 1994; Jaeger & Page, 1996; T. Kane & Rouse, 1995a; Surette, 1997). This body of studies analyzed data from a range of nationally-representative samples. These include: the 1979 and 1986 follow-ups of the National Longitudinal Study of the High School Class of 1972; the 1989, 1990, and1993 follow ups of the National Longitudinal Study of Youth; the 1984, 1987, and 1990 cohorts of the National Survey of Income and Program Participation; and various iterations of the Current Population Survey. The typical analytical approach was to regress either hourly wages or annual earnings on a prediction model that specified highest degree or certificate obtained, number of years of postsecondary education completed if no degree was obtained, and, depending upon the specific study, statistical controls for important confounding influences (e.g., tested ability, labor market experience, socioeconomic background, and the like).
Consistent
with the conclusion from our 1991 synthesis, the weight of evidence from this
research suggests that the individual who completes a bachelor’s degree obtains
a statistically significant earnings advantage over a similar individual with
the equivalent of four years of college credits, but no degree. The magnitude of this earnings advantage is
more difficult to determine. However,
across all studies our best estimate is that men with a bachelor’s degree earn,
on average, about 15% more than men with four years of college credits but no
degree. For women, the corresponding
earnings advantage is about 12%.
Although the estimates are quite variable and not as consistent as those
for the bachelor’s degree, the weight of evidence would also suggest the
presence of statistically significant credential/program effects for the
associate’s degree. Combining the
results from all studies using national samples that provide relevant evidence (Arkes,
1999; Grubb, 1997; Jaeger & Page, 1996; T. Kane & Rouse, 1995a;
Surette, 1997), we
estimate that men who finish an associate’s degree earn, on average, about 9%
more than men with the equivalent of two years of postsecondary education, but
no degree. For women, the corresponding
earnings advantage for completing an associate’s degree is about 11%.[11] We would caution, however, that these
estimates, as well as those for a bachelor’s degree, are somewhat rough and may
not be particularly robust.
Finally,
although it is not unequivocal, there is also a modicum of evidence from
nationally-representative samples to suggest a credential/program effect for
completion of vocational training. For
example, Grubb’s (1997) analyses of the 1984, 1987,
and 1990 cohorts of the National Survey of Income and Program Participation
found that, across all three years, women who obtained a vocational certificate
had an average earnings advantage of about 10% over women with one year of
postsecondary credits but no credential.
For men, the corresponding advantage was about 10% in 1984, but
decreased to near parity or a slight disadvantage in 1987 and 1990. On the other hand, Surette’s (1997) analyses of the National
Longitudinal Study of Youth through 1993 found that men who completed
vocational training had a statistically significant 5% advantage in hourly
wages over men with the required postsecondary credits but no degree. Our conclusion then is that the
credential/program effect of completing vocational training, while likely real,
is somewhat less certain and smaller in magnitude than the credential/program
effect for either the associate’s degree or the bachelor’s degree.
Evidence
establishing the net earnings premium of postsecondary degrees provides a
perspective on only one part of the economic returns picture. Premium research focuses primarily on
benefits, without considering the attendant costs. Yet, postsecondary education often requires a
financial investment on the part of the student in the form of tuition, books,
and other educational fees. Moreover,
for a substantial number of students, the time they invest in postsecondary
education is a time during which they forego income or, if they work part-time
during college, at least part of the income that they would have earned had
they entered the labor force immediately after high school. Such foregone earnings are sometimes referred
to as the opportunity costs of attending college. Attempts to take the full range of costs into
account when estimating the economic returns to postsecondary education has
spawned a line of inquiry we will refer to as private (or internal) rate of
return research.
Basically,
private rate of return is an attempt to estimate one’s percentage return on
investment. Not surprisingly, the actual
computation can get pretty complicated and esoteric due to a number of
assumptions that must be considered, such as inflation on foregone earnings (e.g.,
Alsalam & Conley, 1995; Becker, 1992; Cooper & Cohn, 1997; Geske, 1996;
Leslie, 1990; McMahon, 1991). However, a simple way to visualize at least
the fundamental concept of private rate of return to a bachelor’s degree is to
divide the difference between average posttax earnings of bachelor’s degree
holders and high school graduates by the sum of the private unsubsidized costs
of education, plus foregone earnings.
For illustrative purposes, consider the following example using
fictitious numbers for simplicity.
Suppose that the average annual posttax earnings of all male bachelor’s
degree holders in the county in 1989 was $30,000 and the corresponding average
posttax earnings of male high school graduates was $22,000. Therefore, a male with a bachelor’s degree
could expect to earn on average during his working life $8,000 more per year
($30,000 - $22,000) than he would be earning with only a high school
degree. Let’s also suppose that the
average total unsubsidized costs of a college education (combining private and
public institutions) in 1989, plus average foregone earnings if one didn’t work
during college were $60,000. If
postsecondary education were considered an investment, such an arrangement
would be the equivalent of purchasing a promise to receive an average of $8,000
annually during one’s working life at a present cost of $60,000. If we divide $8,000 by $60,000, we see that
the average annual yield of investing in a bachelor’s degree is 13.3%. This 13.3% would be considered the private
rate of return to a college degree.[12]
In
our previous synthesis, we concluded that the average private rate of return to
a bachelor’s degree, based on studies covering the time period from 1940 to
1982, was somewhere between 11.8 and 13.8%.
When this was adjusted for differences in intellectual ability between
high school and college graduates, the private rate of return for a bachelor’s
degree fell to between 9.3 and 10.9%.
The evidence we uncovered in our present synthesis suggests that this
private rate of return to a bachelor’s degree has remained stable or, parallel
to the earnings premium for a bachelor’s degree, perhaps even increased in the
late 1980s and early 1990s (Arias
& McMahon, 2001; Cohn & Hughes, 1994). As with our literature review for How
College Affects Students, we have had the benefit of a number of excellent
reviews of the private rate of return findings in shaping our present synthesis
(e.g.,
Alsalam & Conley, 1995; Becker, 1992; Boesel & Fredland, 1999; Cohn
& Hughes, 1994; Geske, 1996; Leslie, 1990; McMahon, 1991; Paulsen, 1998). Although they differ in the literature they
review, all of these syntheses provide a rather consistent estimate of the
average private rate of return to a bachelor’s degree at around 12%, with a
typical range from about 9-16%.
From
one perspective, these estimates may be biased upward because they typically
are not corrected for ability or intelligence.
However, an interesting paper by Arias and McMahon (2001) uses recent studies of
identical twins to estimate the average bias to ability and measurement error
at about 12%. Applying their adjustment,
our estimate of the average private rate of return to a bachelor’s degree,
controlling for ability, would be about 10.6%.[13]
From
another perspective, however, the unadjusted estimates of the private rate of
return to a bachelor’s degree may underestimate the true private rate of return
because they do not take into account other monetary returns such as health
care, retirement, stock options, and support for continuing professional
development. These and related fringe
benefits tend to be more substantial in the kinds of jobs held by college
graduates (Boesel
& Fredland, 1999; Geske, 1996). There is also the issue of foregone
earnings. Since so many students work
while attending college, the assumption of many private rate of return
estimates that students will forego all earnings while obtaining their bachelor’s
degree seems untenable (Cohn &
Rhine, 1989). Indeed in analysis of the 1985 wave of the
Panel Study of Income Dynamics, Cooper and Cohn (1997) found that when they took
into account, along with other factors, the average earnings of a student while
attending college, the private rate of return to a bachelor’s degree ranged
from 12.1 to 19.3%.
Even
if one assumes that the private rate of return is what we estimate the average
to be, 12%, such a rate of return compares quite favorably with other
investments (Boesel
& Fredland, 1999; Cooper & Cohn, 1997). As Boesel and Fredland point out, returns on
the stock market have typically averaged around 11%, but, unlike private rate
of return, the stock market rates are nominal returns that disregard inflation. Moreover, if one considers the option value
of a bachelor’s degree (e.g., the option of entering graduate or professional
school), as well as the nonmonetary returns (e.g., health benefits, working
conditions, lifelong learning, enhanced life chances for children (see
Leslie, 1990; Mathios, 1989; McMahon, 1998), a college degree continues
to be a reasonably informed and prudent investment.[14], [15]
Although
the evidence is quite clear that bachelor’s and associate’s degrees provide
substantial occupational prestige and earnings premia to individuals who obtain
them, it is not always as clear just why this is the case. Determining the causal mechanism(s)
underlying the positive link between postsecondary education and both
occupational prestige and earnings has become one of the favorite indoor sports
of both economists and sociologists. In
our 1991 synthesis, we concluded that no single causal mechanism provided a
completely satisfactory explanation and that a number of processes may be at
work. We uncovered little evidence in
the decade of the 1990s to suggest a fundamentally different conclusion.
As
suggested by Bills (2000), there are at least seven
distinct theories or explanations that economists and sociologists have offered
for why those with the most schooling get the most desirable and best
jobs. Since a detailed discussion of
these theories is beyond the scope of this book, we confine our synthesis to
the evidence regarding three of the major theories: human capital,
signaling/screening, and credentialing.
Human capital theory suggests that college graduates have more desirable
jobs and earn more than high school graduates because postsecondary education
provides the former with marketable skills and abilities relevant to job
performance. Signaling/screening are two
complementary mechanisms in that job seekers signal and employers screen (Bills,
2000). Postsecondary education may not so much
influence the cognitive and personal traits related to job productivity as
simply select for individuals who have such traits to begin with. Thus, a college degree can be used by job
seekers to signal desirable intellectual and personal traits, irrespective of
whether those traits are acquired as the result of postsecondary education. Employers can use a college degree as a relatively inexpensive screening device to select individuals who
they believe possess intellectual skills and personal traits predictive
of productivity for the best jobs.
Finally, credentialism posits that employers may not select or reward
individuals solely on the rational basis of potential or actual
productivity. Rather, the factors that
influence these decisions are shaped by such things as social class, snobbery
or, as suggested by Bills (2000, p.
20) “widely
shared societal assumptions about the appropriate relationship between
schooling and job assignment.” This
would mean that those with postsecondary degrees could end up being overly
positioned or rewarded in the labor market for reasons unrelated to individual
productivity (Jencks et al.,
1979).
While
we found evidence to support each of these explanations, none seems sufficient
to unambiguously account for the relationship between educational attainment
and labor market rewards. For example,
the most straightforward explanation is probably human capital; and the
underlying premise that postsecondary education provides skills that make
individuals better employees has considerable logical appeal. It seems almost axiomatic that a bachelor’s
degree in such fields as engineering, accounting, nursing, and speech
pathology, to name a few, indicates the completion of a course of study that
actually provides knowledge and skills important to effective job
performance. Not inconsistent with this
view are Grubb’s (1996;
1997) findings
for both men and women that the economic returns to bachelor’s and associate’s
degrees tend to be more pronounced when one’s academic major is closely related
to one’s job than when it is unrelated.
Similar results are reported for two national samples of bachelor’s
degree recipients by Tsapogas, Cahalan, and Stowe (1994) and for graduates of single
institutions by Callaway, Fuller, and Schoenberger (1996), Dutt (1997), and Fuller and
Schoenberger (1991). Presumably, if the skills one acquires in his
or her program of study are applicable to the job requirements, the economic
returns increase, a result generally compatible with
human capital theory. However, as Grubb
points out, this may also be explained by the fact that those academic majors
that are linked to the highest economic returns are also the ones most likely
to lead to related employment (e.g., engineering,
business, health).
Whether
evidence suggesting a strong relationship between educational attainment and
labor market success is simply the result of increasing one’s human capital is
nearly impossible to verify in the evidence we reviewed. For example, in their analyses of the 1986
follow up of the National Longitudinal Study of the High School Class of 1972,
Knox, Lindsay, and Kolb (1993) found an almost monotonic
positive relationship between amount of formal postsecondary education
completed and both occupational status and earnings, even after controls were
introduced for ability test scores, race, gender, and socioeconomic
status. Similar findings are reported
for earnings by Arkes (1999) in analyses of the 1993
wave of the National Longitudinal Study of Youth. One could reasonably view such findings
through the lense of a human capital perspective and conclude that, net of
ability, the greater one’s acquisition of high level knowledge and skills, as
indicated by amount of exposure to postsecondary education, the greater one’s
returns in the labor market. On the
other hand, such evidence may merely suggest that years of postsecondary education
or degrees signal important personal skills or attributes that employers value because they predict job productivity. For example, Arkes (1999) concluded that a bachelor’s
degree signals intellectual ability to employers. However, it was also the case that bachelor’s
and associate’s degrees provided an earnings premium above and beyond
intellectual ability and the equivalent numbers of credit hours required. This suggests that these degrees may signal
personal attributes to employers that they value as predictors of job
productivity, other than ability (e.g., ambition, motivation, persistence).
Other
evidence reported by Grubb (1993) is purported to support the
screening/signaling hypothesis, at least in part. Grubb reasoned that if degrees signaled
ability or other desirable traits to employers, then they would leave a
stronger impact on earnings in salaried occupations, which are presumably
screened, than on the earnings of those who were self-employed. Using the 1986 follow-up of the National
Longitudinal Study of the High School Class of 1972, and controlling for such
factors as ability, job experience, socioeconomic status, and high school
grades, Grubb found mixed support for his hypothesis. Vocational associate’s degrees counted more
in salaried (screened) than in self-employed (unscreened) positions, while
generally the reverse was true for the bachelor’s degree. Grubb concluded that the labor market for
sub-baccalaureate credentials works differently than it does for bachelor’s
degrees. Such a
finding further underscores the difficulty one has in uncovering a single, or
perhaps even a predominant, explanation for the education-earnings
relationship.
Evidence
supporting a credentialing explanation for the fact that the more highly
educated have the most desirable and best paying jobs rests largely on the
evidence we reviewed in the previous section of this chapter on credential or
program effects. As we saw in that
section, the weight of evidence was reasonably clear that individuals receive
an earnings bonus for completing a bachelor’s or associate’s degree above and
beyond the economic return of having the equivalent years of college (four or
two, respectively), but not completing the degree. It is highly questionable that the final year
of postsecondary education leading to either the bachelor’s or the associate’s
degree actually enhances individual productivity at a higher rate than the
preceding years. Thus, through a
credentialing lense, degrees may function as socially-sanctioned gatekeepers by
which those who have them gain easier access to higher-paying jobs and career
paths than those who do not, for reasons not necessarily related to productivity. Put another way, postsecondary degrees are
less about conferring labor market skills, or signaling ability, than they are
about conferring status that can be used in American society to gain entry into
the most prestigious and rewarding occupations.
Of
course, the earnings bonus or boost associated with completion of postsecondary
degrees does not necessarily lead to credentialing explanation. Completing a degree might signal personal
traits such as perseverance or focus that are important to employers because
they predict job productivity. Moreover,
a degree may represent completion of a coherent, integrated program of study
that is more predictive of job relevant skills than simply completing an
equivalent number of postsecondary credit hours.
What
seems evident is that the causal mechanisms underlying
the relationship between educational attainment and both occupational
positioning and earnings are complex.
They may function differently, and with varying degrees of importance,
in different career paths, at different times in one’s career, in different
jobs or labor market sectors, and with changes in the economy and the nature of
work. It may be fruitless to search for
a single, dominant explanation.
Furthermore, the increased importance of computers and information
technology, and how they influence fundamental notions of work and career may
be an additional wild card that shapes broad-based societal perceptions of
competence and competitiveness in the labor market (Bassi,
1999).
In
this section, we have attempted to summarize the evidence on the net effects of
college on career and economic returns.
Our estimates are based on the average returns that accrue to an
individual, irrespective of the type of postsecondary institution attended or
one’s academic and nonacademic experiences once there (e.g., major field of
study, grades, extracurricular involvement, and the like). Consequently, they potentially mask
variations in between- and within-college effects. We turn to these in the next two sections of
the chapter, starting with between-college effects.
Between-College Effects
Conclusions from
The
most investigated of all institutional characteristics is that of institutional
“quality,” typically assessed in terms of student body selectivity (e.g.,
average ACT or SAT score of entering students) or reputational and prestige
indexes. Compared with other
institutions, elite or selective institutions tend to enroll students with high
occupational status aspirations to begin with, and their impact appears to be
one of maintaining or perhaps slightly accentuating the status level or academic
career orientation of initial choice.
This net impact on career choice is quite small compared to that
attributable to career choice at the beginning of college. It may be particularly true of students
attending selective or prestigious institutions that the undergraduate
experience is used more to implement than to choose a career.
Attendance
at a selective college modestly increases the likelihood that women will choose
sex-atypical (male-dominated) majors and careers and that they will enter
sex-atypical occupations. It also
appears that a degree from an elite institution confers a slight advantage in
various dimensions of career mobility and success (e.g., technical or
supervisor responsibility, level of managerial attainment). However, with the possible exception that
college selectivity may have more positive implications for attainment in the
professions than in managerial or business occupations, the weight of evidence
indicates that attending a selective or prestigious institution has little net
impact on overall job status, job productivity, or job satisfaction.
Net
of other factors, college quality (and particularly selectivity) has a small
positive direct effect on earnings. The
best estimate of the magnitude of this effect is that quality indexes account
for between 1 and 1 1/2 percent of the variance in individual earnings above
and beyond other factors. There is some
evidence that this effect is nonlinear; only those colleges at the very top of
the distribution of selectivity or academic reputation may significantly
enhance earnings. Estimates of direct
effects may underestimate the total positive impact of institutional quality
measures on earnings. Institutional
quality may also have a positive effect on earnings by enhancing educational
attainment and attendance at prestigious professional schools. We conclude that the evidence is more
supportive of a screening (as opposed to a human capital) explanation for the
apparent impact of college quality on earnings.
Comparison
of two-year and four-year institutions has produced the most pronounced and
consistent between-college effects on occupational status. Net of other factors, students who begin the
postsecondary education experience in two-year colleges have significantly
lower job status than those who start at four-year institutions. Most of this difference, however, appears to
be attributable to the adverse impact of two-year institutions on educational
attainment. For individuals of equal
educational attainment, whether they start at two-year or four-year
institutions makes little difference in early occupational status, employment
stability or job satisfaction.
Similarly, when individuals of equal background traits and educational
attainment are compared, any direct earnings penalties for attending a two-year
college are quite small early in the career, though they may increase slightly
with longer work experience. It is
likely, however, that initial attendance at a two-year college may have a
discernible negative indirect effect on earnings due in large measure to its
inhibiting influence on educational attainment.
There
is evidence that men’s colleges have independently enhanced male career choice
and attainment in such areas as business, law, and the professions in general. Substantially more research, however, has
focused on the impact of women’s (versus coeducational) institutions. The weight of evidence suggests that
attending a predominantly women’s institution rather than a coeducational one
has little or no independent impact on a woman’s career salience (interest in
or commitment to a career), the status or prestige level of the job she
obtains, her earnings, or the likelihood of her actually entering a
sex-atypical career (globally defined according to the percentage of men in the
field). On the other hand, women’s
institutions appear to enhance orientation toward a sex-atypical occupation
during college, entrance in certain specific
sex-atypical occupations (such as medicine and scientific research), and
prominence or achievement within a specific occupational status level.
Net
of other factors, attending a predominantly black institution rather than a
predominantly white institution appears to have only a trivial impact on the
occupational status of black men or black students generally. However, some evidence suggests that
attendance at a black college may enhance the early job status of black
women. There was little consistent
evidence to suggest that college racial composition had a statistically
significant net impact on the earnings of black men or women.
Attending
a large institution appears to have a small positive influence on occupational
status and earnings that is independent of student background characteristics
and the selectivity of the student body.
There is parallel evidence to suggest that major research universities,
most of which are large, also positively influence earnings; but it is
difficult to separate this effect from institutional quality.
Institutional
control appears to have little consistent impact on career choice, occupational
status, or women’s entry into sex-atypical careers. However, public control appears to enhance
the likelihood of successfully implementing career plans for becoming an engineer
or college teacher while reducing the likelihood of successfully implementing
plans for law, business, medicine or nursing.
The major influence of liberal arts colleges may be in their enhancing
of women’s choice of sex-atypical majors and careers, although the evidence
supporting this conclusion is not particularly strong. Net of other factors, attending a liberal
arts college would appear to have little or no impact on occupational status.
The
most consistent college environmental impact on career choice appears to be
that of “progressive conformity.”
Progressive conformity hypothesizes that student career choice will be
influenced in the direction of the dominant peer groups in an institution. A small amount of evidence indicates that
irrespective of initial career choice, seniors tend to be planning careers
consistent with the most typical academic majors in their institution. There is also evidence, though less of it, to
suggest that independent of initial career choice, a student’s likelihood of
actually working in a particular occupation increases with the percentage of
majors at his or her college corresponding to that occupation.
There
is modest support for the expectation that transfer between four-year
institutions has negative consequences for both early career occupational
status and earnings. Most of this
negative effect is indirect through the inhibiting influence of transfer on
educational attainment.
Considering
only four-year institutions, the weight of evidence suggests that any
statistically significant between-college effects are quite modest in
magnitude. This is particularly the case
when compared to the general net effects of attending rather than not attending
college.
Evidence from the 1990s
We uncovered a substantial body of studies conducted during the decade of the 1990s that focused on between-college impacts on career and economic returns. Much of this research is uneven in terms of methodological rigor; and perhaps in part because of these methodological problems it is difficult to find evidence consistent enough to permit unequivocal conclusions. Even in those areas where the evidence is relatively strong (e.g., the impact of college selectivity on earnings), there are alternative findings or explanations which tend to muddy the waters. The same fundamental methodological problem that accompanies any estimate of between-college effects is particularly relevant in determining the between-college effects on career. Specifically, there is great variability in the cognitive abilities, socioeconomic backgrounds, career aspirations, and ambitions of students attending different kinds of postsecondary institutions (e.g., Behrman, Kletzer, McPherson, & Schapiro, 1995; Behrman, Rosenzweig, & Taubman, 1994; L. Lewis & Kingston, 1989; Lillard & Gerner, 1999; Sazama, 1994). Furthermore, such individual student characteristics are likely to play a major role in different dimensions of career choice and success. For example, a number of economists have noted that the economic returns to cognitive skills (i.e., the correlation between scores on standardized cognitive tests and earnings) has increased over the past several decades (e.g., Hoxby & Long, 1999; Murnane, Willett, Duhaldeborde, & Tyler, 1998; Murnane, Willett, & Levy, 1995; Neal & Johnson, 1994). Similarly, one of the strongest predictors of eventual occupational attainment (e.g., occupational status) is occupational aspirations or ambition when entering college (e.g., Inoue & Ethington, 1997; Kingston & Smart, 1990; Stoecker & Pascarella, 1991; Whitaker & Pascarella, 1994). Consequently, the relationship between the type of college attended (e.g., selective versus nonselective) and any particular career outcome (e.g., earnings) is likely to be substantially confounded by differences in the career-salient characteristics of the students who attend different kinds of colleges.
Estimating
between-college effects on career and economic returns is also complicated by
other factors. For example,
postsecondary institutions not only differ dramatically in the kinds of
students they recruit and enroll, they may also differ dramatically in what it
costs the individual to attend them (Choy,
1999). For example, Morganthau and Nayar (1996) point out that the average
cost of attending an elite private college (e.g., an Ivy League, or similar,
school) is about $1,000/week, while the average cost of attending a public
university is about one-fourth of that, or about $250/week. Moreover, it is clearly the case that many
measures of institutional “quality” (e.g., selectivity, academic reputation,
prestige) are confounded by whether or not the institution is private. Even though the “real” costs of attending college
may be less because of widespread financial aid in the form of student aid,
grants, fellowships, tuition waivers, and the like, these differences in costs
are still substantial, and undoubtedly need to be taken into account when
estimating the earnings’ returns accruing to the graduates of different kinds
of colleges.
A
second factor is major field of study.
As we will see in the section on within-college effects in this chapter,
a student’s major field of study is, unsurprisingly, a major determinant of
one’s eventual occupation and earnings.
However, it is evident that different types of colleges offer their
students different kinds of academic majors.
For example, as pointed out by Jacobs (1999), more
selective/prestigious, private institutions tend to focus on academic fields of
study that lead to more lucrative jobs (e.g., engineering, business,
science). Conversely, because of their
state-oriented mission, less selective, public institutions may be expected, if
not required, to offer academic majors that lead to less lucrative occupational
paths (e.g., education, social work, home economics). Thus, if academic field of study is not taken
into account, it may be easy to attribute the earnings or occupational status
differences of graduates to an institutional effect when it is really the
result of one’s major field of study.
Finally,
the estimation of between-college effects on career and economic returns is
also complicated by the fact that a substantial number of students in the
American postsecondary system attend more than one college or university before
earning their bachelor’s degree (Adelman,
1998a). However, as opposed to such outcomes as
learning, cognitive development, and values and attitudes, between-college
impacts on career and economic returns do not necessarily assume a human
capital or socialization influence (i.e., that some colleges provide a higher
quality education than others). Rather,
the impact of where one attends college may, in fact, simply reflect the extent
to which completing a bachelor’s degree from that particular institution
signals personal traits that employers value as predictive of job performance
or productivity, irrespective of where they were acquired (e.g., high
intelligence, ambition, social skills, and the like).
The
above considerations clearly make the estimation of between-college effects on
career and economic returns complex and fraught with ambiguities. Nevertheless, we have attempted to synthesize
this body of evidence within the following general categories: institutional
quality, institutional control, Carnegie classification, institutional size,
institutional racial composition, institutional gender composition, two-year
versus four-year colleges, and impact of peers.
Research
estimating the net impacts of institutional quality constituted at least 50% of
the total body evidence we uncovered pertaining to between-college effects on
career and economic returns. Not
surprisingly, different studies operationally defined institutional quality in
different ways. Included were such
dimensions as: academic expenditures/student, faculty/student ratio, percentage of faculty with Ph.D.s, tuition costs,
reputational ratings, average faculty salaries, and selectivity (typically
based on the average ACT or SAT scores of entering freshmen). An obvious problem, of course, is that all
these various dimensions of institutional quality tend to be substantially and
positively intercorrelated. For example,
the most academically selective institutions tend also to have the highest
reputational ratings, the highest faculty salaries, the highest expenditures/student,
and, because they also tend to be private, the highest tuition costs. As a result, and because of the vagaries of
multiple regression procedures when the predictors are highly correlated,
determining which quality dimensions are having the strongest impact is
frequently problematic. Some researchers
have dealt with this problem by creating a composite measure of institutional
quality that combines several of the dimensions indicated above. Most, however, have employed institutional
selectivity (e.g., the average ACT or SAT score of
incoming students) as a single proxy measure for institutional quality. The research on the impact of institutional
quality has focused on career choice, occupational status, career mobility and
success, and earnings.
Career Choice
What
little evidence we uncovered suggests that institutional quality measures have
only a mixed impact on students’ career choices during college. For example, Cole, Barber, Bolyard, and
Linders (1999) focused on the career
choices of high achieving arts and sciences majors (grade point averages of 2.8
or above) at 34 institutions: 8 Ivy League schools, 13 liberal arts colleges, 9
large state universities, and 4 historically black colleges. Statistical controls were introduced for an
extensive set of potential confounding influences such as: race, specific
freshman career interest, academic ability, college grades, interaction with
faculty, influence of work experience, and the like. In the presence of such controls, attending
an Ivy League institution (versus all others) had no significant impact on
choosing law, medicine, or college teaching as a career. Attending an Ivy League school did modestly,
but significantly increase the likelihood that one would choose business as a
career. However, this increase was
essentially attributable to differences in senior-year business career choice between
students at Ivy League schools and seniors at large public universities. In all four career choices
(law, medicine, business, and college teaching), initial interest in a career
as a freshman was, by far, the strongest predictor of senior career choice.
Tusin
(1991) analyzed the 1971-80
Cooperative Institutional Research Program data to determine why women choose
elementary and secondary school teaching as a career. Net of a battery of potential confounding
influences, including freshman-year career choice, institutional selectivity
had a modest, but statistically significant negative influence on choosing
elementary or secondary school teaching as a career. Such a finding may reflect the influence of
faculty and peer cultures at selective institutions in shaping a student’s
career aspirations and choice. The
normative press of the culture at selective, elite institutions may function to
steer student aspirations toward career choices that are perceived as more
lucrative and “prestigious” than teaching in elementary or secondary schools. At the same time, the effect could just as
easily be attributable to the fact that more selective colleges and
universities, particularly if they are private, are substantially less likely
to offer education and teacher preparation as a major field of study.
Occupational
Status
Consistent
with conclusions from our 1991 synthesis, we found little evidence to suggest
that measures of institutional quality have more than a trivial and
statistically nonsignificant direct impact on overall occupational status. Analyzing the 1986 follow-up of the National
Longitudinal Study of the High School Class of 1972, Knox, Lindsay, and Kolb (1993) introduced statistical
controls for such factors as tested academic ability, race, gender,
socioeconomic background, college grades, major field of study, educational
attainment, and the like. In the
presence of these controls, the selectivity of the institution attended had a
small and nonsignificant effect on the occupational status of the job one held
in 1986. Remarkably consistent results
are reported by Avalos (1996), analyzing the 1994
follow-up of the Cooperative Institutional Research Program’s 1985 Freshman
Survey, and by Dey, Wimsatt, Rhee, and Waterson (1998), analyzing the 1974-75 and
1992-93 follow-up of 1,957 high school seniors from the Wisconsin Longitudinal
Study. Both studies employed an
analytical design similar to that of Knox et al. and introduced statistical
controls for salient confounding influences.
In the Avalos study, institutional selectivity failed to have a
significant direct impact on 1994 occupational status; and in the Dey et al.
study, neither institutional prestige (e.g., composite of selectivity, percent
of students seeking a Ph.D., median high school grades of entering students,
and ratio of high ability applicants to total number of admitted students) nor
institutional resources (e.g., average faculty salary, faculty with Ph.D.s,
number of library volumes) significantly influenced 1974-75 occupational status
or 1992-93 occupational status.[16]
All
three of the studies cited above (i.e.,
Avalos, 1996; Dey et al., 1998; Knox et al., 1993) focus on estimating the net
direct influence of measures of institutional quality on overall
occupational status. While the clear
weight of evidence suggests that this direct influence is trivial and not
statistically significant, it is likely that institutional quality may,
nonetheless, have at least a modest positive, indirect effect on occupational
status. This indirect influence is
attributable to the fact that (as we saw in Chapter ) dimensions of institutional quality such
as student body selectivity positively influence educational attainment, which,
in turn, is a strong determinant of the prestige of the job one holds. Unfortunately, the analytical models in the
investigations by Avalos (1996), Dey et al. (1998), and Knox et al. (1993) do not permit us to
estimate the magnitude or statistical significance of this indirect effect.
The
failure of college quality measures to directly influence overall job status is
consistent with our 1991 conclusions.
However, also consistent with our 1991 conclusions is evidence to
suggest that attending a selective college enhances occupational attainment in
specific professions such as medicine and law.
For example, Lentz and Laband (1989) found that even with
controls for college grades, college courses taken, Medical College Admissions
Test scores, race, and parental occupation and education, the academic
selectivity of the college one attended had a statistically significant,
positive influence on admission to medical school. Similarly, Kingston and Smart’s (1990) analyses of the 1980
follow-up of the 1971 Cooperative Institutional Research Program freshman
survey found that attending one of the 74 most selective private colleges in
the United States significantly increased one’s likelihood of completing a high
status professional degree (i.e., MD, JD, MBA).
This effect persisted even in the presence of statistical controls for
such factors as race, sex, family background, high school achievement, precollege
occupational aspirations, and self-estimates of academic ability and drive to
achieve. Interestingly, in both studies
this effect was nonlinear, and generally accrued only to those students
attending the most selective or elite institutions in the country. For
Consistent
with the conclusions of our 1991 synthesis, we found a small body of evidence
to suggest that attending a selective college confers a modest advantage in job
attainment and career mobility. The
evidence, however, is somewhat complex and suggests that college quality may
signal an individual’s ability to employers, rather than conferring unique
skills that make for better job performance.
Data from graduates of accounting programs in 82 universities was
analyzed by Colarelli, Dean, and Konstans (1991) to determine if
institutional characteristics influenced job offers and early job
productivity. Measures of institutional
quality such as student body selectivity and institutional resources were both
significantly and positively related to the number of job offers an individual
received from the eight largest and most prestigious accounting/consulting
firms in the region. However, after one
year on the job supervisors’ ratings of job performance and promotability were
unrelated to institutional resources and actually had a significant negative
association with institutional selectivity.
A
more focused set of longitudinal studies by Spilerman and colleagues (Ishida,
Spilerman, & Su, 1997; Spilerman & Lunde, 1991) investigated the educational
factors that influenced job promotion prospects in a single large insurance
company. Spilerman and Lunde (1991) introduced statistical
controls for years of education, race, gender, age, seniority, and salary grade
level and found that a measure of college selectivity had modest, but
statistically significant positive effects on promotion in the middle
organizational ranks where college training would provide relevant job
skills. The selectivity of the
institution one attended had only a chance impact on the likelihood of being
promoted at either the lowest or highest organizational ranks in the
company. Generally consistent results
were also reported by Ishida, Spilerman, and Su (1997) in what appears to be a
further study of promotion in the same company.
With controls for level of formal education, college major, age, race,
sex, and seniority, institutional selectivity once again had a modest, but
statistically significant positive impact on promotion to the middle
organizational ranks of the company (i.e., senior management), but essentially
only a chance effect on promotion at either lower or higher ranks (i.e.,
administrative or vice-presidential grades).
Although
it is more prominent in the Spilerman and Lunde (1991) study than in the Ishida,
Spilerman, and Su (1997) study, both investigations
provide evidence to suggest that at the lower and middle ranks of the firm they
studied, the impact of college selectivity on promotion varied with experience
or seniority in the firm. The positive
effect of college selectivity was greatest for employees who were recent or
initial hires in the firm and at the early stages in their careers. As seniority in the firm increased, and
direct measures of job performance became available, the selectivity of the
college one attended decreased in importance.
Spilerman and his colleagues conclude from such evidence that given lack
of direct information on job performance of new hires at the beginning of their
careers, the firm’s employers use college selectivity as a proxy or “signal”
for the possession of intellectual and related skills that are important for
job performance. However, if college
selectivity signals higher intellectual or other skills related to effective
job performance, it is not clear from either the Spilerman and Lunde or Ishida,
Spilerman, and Su studies if the individual acquires them from his or her
experience in college or essentially entered college with them.[17]
Finally,
there is also evidence of an indirect nature that speaks to the effect of
college quality on career mobility.
Robst (1995) analyzed data from 560 male
heads of household between 18 and 64 years of age in the 1976, 1978, and 1985
waves of the Panel Study of Income Dynamics.
His purpose was to estimate the net impact of college selectivity on the
probability that an individual was employed in a job for which he was
overeducated (i.e., held a job in which his education was substantially higher
than that typically required). With
controls for years of education, work experience, number of years in one’s
current job, and scores on a 13-question sentence completion test, three
institutional quality measures (i.e., average ACT/SAT scores of the entering
freshmen, educational and general expenditures per student, and a prestige
rating) had modest, but statistically significant negative effects on the
probability of being overeducated.
Moreover, college selectivity was also positively associated with the
likelihood of moving from being overeducated for one’s job in 1976 to being in
a job in 1985 for which one was not overeducated. The findings of the Robst study, however, are
likely confounded by the inability to control for men’s precollege levels of
career or occupational aspirations—strong predictors of both a man’s eventual
occupational level and the type of college he attends (Pascarella
& Terenzini, 1991). Robst also
candidly points out that it is questionable that a 13-item sentence completion
test is an adequate measure of individual cognitive ability. In short, the presumed negative effects of
college quality on overeducation may in fact be attributable more to the
characteristics of the men who attend high quality colleges.[18]
Earnings
Perhaps
the largest single body of research on between-college effects on career and
economic benefits concerns the impact of undergraduate institutional quality
measures on individual earnings. Once
again, institutional quality is operationally defined in different ways in
different investigations, but student body selectivity appears to be the most
common proxy for college quality. The
typical study in this body of research analyzes data from a
nationally-representative sample, uses the natural logarithm of earnings as the
dependent variable in order to adjust for positive skewness in the distribution
of earnings, and introduces statistical controls for factors that potentially
confound the relationship between the quality of the institution attended and
an individual’s earnings. These
confounding factors include such variables as ability test scores, family socioeconomic
background, race, sex, major field of study, educational attainment, and the
like. On average, the studies we
reviewed explained considerably less than half of the variance (R2)
in individual earnings, typically in the neighborhood of 25-35%. Unless one is willing to accept the view that
two-thirds or more of the earnings differences among college graduates are
attributable to luck, it seems reasonable to conclude that a number of
important influences on earnings are not taken into account in the literature
we reviewed.
This
large percentage of unexplained variance does not necessarily mean that it is
impossible to get a reasonably accurate estimate of the net effects of
institutional quality on earnings.
However, in analyzing the evidence we would argue that, in addition to
such factors as race, sex, family socioeconomic factors, educational
attainment, measures of labor market experience, and the like, obtaining an
unbiased estimate of the net, direct impact of institutional quality on individual
earnings means that four additional influences need to be taken into
account. These are: 1) cognitive or
intellectual ability, 2) ambition, 3) major field of study during college, and
4) the differential costs of attending different kinds of institutions. As previously pointed out in this chapter,
cognitive ability and ambition are important considerations because they are
not only highly correlated with attending a selective or elite institution (e.g., A.
Astin, 1993b; Dale & Krueger, 1999; Lillard & Gerner, 1999; Pascarella
& Terenzini, 1991), but are also salient predictors of earning potential
(Monks,
2000; Murnane et al., 1995; Sweetman, 1994a, 1994b; Whitaker & Pascarella,
1994). Similarly, it is important to take into
account major field of study because selective/prestigious institutions tend to
offer academic fields of study that lead to the most lucrative jobs (Jacobs,
1999). Finally, failure to account for the
substantially higher costs typically associated with attending a selective/prestigious
(and often private) college can lead to inflated estimates of the actual net
earnings benefits associated with attendance and graduation from such
institutions (Behrman, Rosenzweig, & Taubman, 1996; Brewer, Eide, & Ehrenberg,
1999; S Thomas, 1998; S. Thomas, 2000). Nearly all of the effects of
college quality on earnings is derived from secondary
analyses of preexisting data sets. The
variables represented in most of these data sets simply do not permit one to
introduce controls for all, or even most, of the important confounding
influences. Consequently, as suggested
by Kane (T. Kane,
1998, p. 432) in a
summary caution about research on college quality and earnings, “what looks
like an effect of attending an elite college may really be an effect of
unmeasured preexisting differences in academic or earning potential.”
Our
present synthesis is based on evidence from 26 individual published and
unpublished studies which appeared between 1989 and 2000. These investigations analyze data from
numerous independent data sets. The
specific data sets and the studies that employ them were as follows:
1. The National
Longitudinal Study of the High School Class of 1972-1979, and 1986 follow-ups (Arcidiacono,
1998; Brewer et al., 1999; Dale & Krueger, 1999; Hoxby & Long, 1999;
James & Alsalam, 1993; James, Alsalam, Conaty, & To, 1989; Knox et al.,
1993; Loury, 1997; Sweetman, 1994a, 1994b).
2. The
High School and Beyond 1980 and 1982 cohorts followed up in 1986 and 1991,
respectively (Brewer & Ehrenberg, 1996; Brewer, Eide, &
Ehrenberg, 1996; Fitzgerald, 2000; Fox, 1993; Hilmer, 2000; T. Kane, 1998;
Loury, 1997).
3. The National Longitudinal Survey of Youth, 1987-89, 1993, and 1995 follow-ups (Daniel et al., 1996a; Daniel, Black, & Smith, 1996b; Hoxby & Long, 1999; Monks, 2000).
4. The College and Beyond 1976 cohort followed up in 1995 (Bowen & Bok, 1998; Dale & Krueger, 1999).
5. The Baccalaureate and Beyond Study of 1992-1993 graduates followed up one year later (S Thomas, 1998) and four years later (S. Thomas, 2000).
6. The National Center for Education Statistics Surveys of Recent College Graduates: 1985-86 graduates followed up in 1987 (Rumberger & Thomas, 1993); 1989-90 graduates followed up in 1991 (Tsapogas et al., 1994).
7. The National Science Foundation New Entrants Survey of 1992 graduates followed up in 1993 (Tsapogas et al., 1994).
8. The Occupational Changes in a Generation, 1972 data (Hoxby & Long, 1999).
9. The Cooperative Institutional Research Program data: 1972 freshmen followed up in 1980 (Kingston & Smart, 1990); 1985 freshmen followed up in 1994 (Avalos, 1996).
10. The Panel Study
of Income Dynamics from 1975 to 1992 (Turner,
1999, April).
11. A survey of
identical and nonidentical female twins born in Minnesota and followed-up in
1993 at about age 45-46 (Behrman,
Rosenzweig et al., 1996).
The
body of evidence yielded by these investigations would suggest the following
general conclusions. First, although
there are some clear exceptions (Arcidiacono,
1998; Avalos, 1996; James & Alsalam, 1993; Knox et al., 1993; S Thomas,
1998; Tsapogas et al., 1994), the weight of evidence
suggests that measures of institutional quality, and particularly student body
selectivity, have statistically significant, positive net impacts on subsequent
earnings. Our best estimate is that, net
of other influences (including both individual student characteristics and
other institutional characteristics such as private control and size),
attending a college with a 100 point higher average SAT score (or ACT
equivalent) is associated with about 2 to 4% higher earnings in later life. [We
note that this estimate is somewhat more conservative than other summaries (e.g., Dale
& Krueger, 1999; Hilmer, 2000), but this difference is
likely attributable to the fact that we derive our estimates from a somewhat
broader range of studies.] Moreover,
when differential tuition costs are taken into account to adjust for the fact that
the most selective institutions are typically private, the positive effect of
attending a selective or elite institution on subsequent earnings is reduced
but does not disappear (e.g., Behrman et al., 1994; Brewer & Ehrenberg, 1996; Brewer et al.,
1999; Sweetman, 1994a). Second, consistent with the
conclusions from our 1991 synthesis, there is also evidence to suggest that the
impact of institutional selectivity on earnings is nonlinear. Only those elite institutions at the very top
of the selectivity distribution may have a substantial impact on earnings (e.g., Fox,
1993; Hilmer, 2000; Kingston & Smart, 1990). Third, there is empirical support for the
contention that the net impact of institutional selectivity or similar quality
measures on earnings has increased over time.
Investigations that consider the effects of college selectivity for
different national cohorts in different time periods tend to find that its
estimated impact on earnings is of a somewhat larger magnitude in more recent
than in older cohorts (Brewer et
al., 1996; Hoxby & Long, 1999; Loury, 1997; Turner, 1999, April). Finally, there is also evidence suggesting
that, in addition to its statistically significant direct effect on earnings,
college selectivity may also have a positive indirect effect due to its
enhancement of educational attainment and graduate or professional school
attendance (Arcidiacono,
1998; Eide, Brewer, & Ehrenberg, 1998). Since these studies do not control for either
precollege educational or occupational aspirations, however, it is likely that
this indirect effect is biased upward by some unknown amount.
Although
most of the evidence on institutional quality and earnings employs various
measures of selectivity as the primary quality indicator, there is also
evidence to suggest that other quality indicators may be linked with
earnings. Unfortunately, there is little
in the way of evidence that is consistent across studies analyzing different
samples. For example, with controls for
other college characteristics as well as individual-level confounding
variables, Daniel, Black, and Smith (1996a;
1996b) found that
expenditures per student had a significant, positive effect on wages for men,
though not for women. However, there is
only mixed support for this finding in the work of Behrman, Rosenzweig, and
Taubman (1996), Dale and Krueger (1999), and Fitzgerald (2000), and none at all in
findings reported by James and Alsalam (1993) and Tsapogas, Cahalan, and
Stowe (1994). Similarly, Tsapogas, Cahalan, and Stowe found
that percent of faculty with a Ph.D. positively influenced earnings in one
national sample they analyzed, but not in the other. Moreover, there was little support for the
unique, positive impact of percent of faculty with a Ph.D. in the earnings
functions of Daniel, Black, and Smith (1996a;
1996b). Behrman,
Rosenzweig, and Taubman did find that average faculty salaries at the
institution attended positively influenced the subsequent earnings of women,
but we uncovered no independent replication of their evidence.
Aside
from various measures of institutional selectivity, we uncovered only one
institutional quality indicator, faculty/student ratio, that
was found to have a significant, positive net effect on earnings across
independent samples. Both Behrman,
Rosenzweig, and Taubman (1996) and Daniel, Black, and
Smith (1996b) found that attending an
institution with a high faculty/student ratio had a significant, positive
effect on earnings, net of other factors.
However, even here the overall findings are inconsistent. In their analyses of two independent national
samples, Tsapogas, Cahalan, and Stowe (1994) found that an institution’s
faculty/student ratio had a significant, net positive effect on earnings in one
sample, and a significant, net negative effect on earnings in the other
sample. Similarly, Fitzgerald's (2000) analyses of the 1991
follow-up of the 1980 High School and Beyond cohort reported that an
institution's ratio of faculty to students had no net impact on women's
earnings and a small negative effect on the earnings of men.
Thus,
the bottom line would appear to be that, when institutional quality is defined
largely in terms of academic or student-body selectivity, it has a generally
consistent positive effect on subsequent earnings. Our estimate is that each hundred point
increase in the average SAT score (or ACT equivalent) of the entering students
at a college increases earnings by about 2 to 4%, though earnings may be most
clearly enhanced by attending an institution at the very highest or elite
levels of the selectivity distribution.
We would argue, however, that the body of research evidence on which we
base this conclusion probably provides an inflated estimate of the impact on
subsequent earnings of having a bachelor’s degree from a selective
institution. Due in large measure to the
fact that they are generally conducting secondary analyses of existing data
sets, nearly every investigation we reviewed in this body of research was
unable to control for one or more salient confounding variables. This was the case for even the most
meticulously conducted and methodologically rigorous studies. For example, Brewer and Ehrenberg (1996) considered cognitive
ability and differential tuition costs, but did not control for either
undergraduate major or an individual’s precollege ambition. Both Bowen and Bok (1998) and Fitzgerald (2000) introduced statistical
controls for cognitive ability and major field of study, but not for
differential tuition costs or ambition.
Most recently, Thomas (2000) controlled for cognitive
ability and academic major and considered differential costs in the form of a
debt/earnings ratio. However, he
included no ambition measures in his prediction of earnings.
It
is measures of individual ambition that are almost universally absent in
investigations of the impact of college quality on earnings.[19] This absence should probably come as no great
surprise as measuring ambition in a way that predicts one’s future economic
success is a nontrivial challenge.
Unfortunately, the inability to adequately specify an individual’s
ambition in regression models does not prevent unmeasured or unobserved
ambition from confounding the relationship between the selectivity of the
college one attends and his or her subsequent earnings. In short, elite, highly selective colleges
may simply recruit and enroll students who would have a high earnings capacity,
irrespective of where they went to college.
This
issue has been creatively addressed in an important study by Dale and Krueger (1999). They hypothesized that, given broad public
awareness of the link between attending an elite college and career success,
the selectivity of the colleges to which a student applies may signal
unaccounted for ambition and earnings capacity.
They tested this hypothesis for a combined sample of men and women by
reanalyzing data from the 1995 follow-up of the 1976 cohort from the College
and Beyond data set. (Previous analyses of this data
by Bowen and Bok (1998) had yielded significant net
positive effects of college selectivity on 1995 earnings.) A basic equation was
developed which regressed the natural logarithm of 1995 earnings on predicted
parental income, individual SAT score, sex, race, high school academic achievement,
collegiate athletic participation, and college selectivity (average SAT
score). In this equation college
selectivity had a significant, positive effect on earnings. However, when measures of the average
selectivity of the colleges to which one applied and the number of applications
one made were added to this equation, the effect of college selectivity on
earnings was reduced to a magnitude that was trivial and nonsignificant. Furthermore, this finding appeared to be
robust. Almost exactly the same results
were obtained when the same control for ambition was applied to a combined
sample of men and women from the 1986 follow-up of the National Longitudinal
Study of the High School Class of 1972—a more nationally-representative sample
than College and Beyond. When a measure
of precollege ambition was taken into account in either sample, students who
attended more selective institutions did not earn more than their counterparts
who were accepted and rejected by comparable schools but attended less selective
institutions.
Despite
the volume of evidence concerning college selectivity and earnings reviewed
above, we tend to agree with Dale and Krueger (1999, p.
29) that their
“findings cast doubt on the view that school selectivity, as measured by the
average SAT score of the freshmen who attend a college, is an important
determinant of students’ subsequent incomes.”
Put another way, extremely bright and ambitious students (i.e., those
with a high earnings capability) are more likely than other students to attend
and graduate from highly selective colleges.
Whether such elite institutions contribute significantly more to those
students’ earnings capabilities[20]
than would less selective schools, however, is problematic.[21]
In
addition to the problem of unmeasured ambition, there is also the question of
which students are really receiving significant economic returns from attending
a selective institution. There is at
least some evidence to suggest that studies that fail to take into account a
student’s educational path, practically a universal characteristic of the
existing body of research, overestimate the effects of institutional
selectivity for what may be the majority of students. In an analysis of the 1986 follow-up of the
nationally-representative High School and Beyond sample, Hilmer (2000) estimated the net returns
to undergraduate college selectivity for three groups of male graduates: direct
attendees (those who initially enrolled at the institution and remained there
through graduation); university transfers (those who transferred to the
institution from another four-year college); and community college transfers
(those who transferred to the institution from a two-year community
college). With controls for such factors
as race, high school and college grades, tested math and reading ability,
college major, labor market experience, and having a postgraduate degree, but
not ambition, the overall effects of college selectivity (average student SAT
score) on earnings were trivial and nonsignificant for direct attendees. Four-year and community college transfers
derived significant economic returns from selectivity, but only if they
transferred to, and graduated from, a four-year institution that had an average
student SAT score of 1200-1400. Since
four-year and two-year college transfer students comprised only about a third
of Hilmer’s nationally-representative High School and Beyond sample, his
findings suggest that for the majority of male four-year college graduates
(direct attendees) the selectivity of the college attended has little impact on
their subsequent economic success.
Institutional
Control (Private Versus Public)
Career
Choice
There
is some limited evidence that institutional control may have an impact on the
prestige of one's career choice. In
Astin's (1993b) analyses of the 1985-89
Cooperative Institutional Research Program data, he attempted to estimate the
effects of different institutional characteristics on college seniors' choice
of various careers. With controls for
initial career choice, other individual-level background traits, institutional
characteristics, and measures of student academic and social involvement in
college, attending a private university had a positive influence on seniors'
choice of physician as a career.
Conversely, attending a private institution had a negative effect on
choice of school teacher as a career.
Occupational
Status
We found little to suggest
that attending a private (as compared to a public) postsecondary institution
had anything more than a trivial and statistically nonsignificant influence on
overall occupational status. Analyzing
the 1986 follow-up of the National Longitudinal Study of the High School Class
of 1972, Knox, Lindsay, and Kolb (1993) introduced statistical
controls for race, sex, family background, tested academic ability, college
grades, college major, educational attainment, institutional selectivity, and
institutional size. In
the presence of such controls, attending a private (versus public)
institutional as an undergraduate had only a small, chance influence on 1986
occupational status. Consistent
results are reported by Dey, Wimsatt, Rhee, and Waterson (1998) analyzing the 1974-75 and
1992-93 follow-ups of the Wisconsin Longitudinal Study of 1957 High School
Seniors.
Earnings
We
uncovered a substantial body of studies that attempted to estimate the unique
impact of attending a private (versus public) institution on earnings. The specific data sets and studies that
employ them are as follows:
1. The National Longitudinal Study of the High School Class of 1972, 1986 follow-up (Arcidiacono, 1998; James & Alsalam, 1993; James et al., 1989; Knox et al., 1993; Sweetman, 1994a, 1994b).