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Comment by joedev | Hacker News Reader

"On average, a four-year degree is the equivalent of an investment that returns 15.2% a year." - http://finance.fortune.cnn.com/2011/06/30/a-college-degree-r...

Stay in school kids.

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I'm not a fan of this kind of interpretation because it treats everyone as an equal. People derive joy from different things in life.

Some people work to live and will only do the bare minimum to get by in order to fulfill their real joys. Those people are less likely to go to college, and are less likely to earn high incomes, because the passion isn't there.

Others live to work. These people love what they do. They go to college because they love it. Then they work really hard to be the best when they enter the workforce, because they love it. The money follows to these people, because they've worked really hard to earn it.

If you forced someone in the former group to go through college, their income coming out is not going to rise. They are still not going to put forth the what it takes to be a higher earner. It's not in their nature, and that's okay.

As they say, correlation does not imply causation. Your earning potential is essentially given to you at birth, plus the luck factor. On a macro level, college isn't going to have any effect on your earnings.

"Your earning potential is essentially given to you at birth"

Interestingly the data shows otherwise. Factors such as parents' education, where one lives, age, race, family structure, IQ are measured and factored in. Two stats techniques are commonly applied. Ordinary Least Squares (OLS) is more traditional while Instrument Variables (IV) is a newer approach which attempts to account for statistical errors such as omitted and unknown variables in order to more strongly determine causality.

If you like stats check out this review of the literature: http://emlab.berkeley.edu/users/card/papers/return-to-school... which concludes that studies "Taken as a whole, however, the findings from the recent IV literature are remarkably consistent with Griliches' (1977) assessment of a much earlier set of studies, and point to a causal effect of education that is as big or bigger than the OLS estimated return, at least for people whose schooling choices are affected by the supply-side innovations that have been studied so far."

There are real economic reasons why governments invest in their citizens' schooling. It's not just because it sounds like a nice idea. The increased income potential of someone going to school pays off for a government higher earnings which is a primary indicator of an economy's health.

Factors such as parents' education, where one lives, age, race, family structure, IQ are measured and factored in.

I would classify those as luck factors. They don't really address what I was speaking to.

Even if you believe college counts, someone with the fanciest of PhDs is going to really struggle to out-earn high school dropouts if he or she is not willing to work on the job. And that is the point. College is not the driver, it is the person. A person can leverage college to find themselves in better standing, but there are a million other ways to do the same.

Just blindly going to college is not going to improve anything with respect to income. You have to be someone who is cut out to earn more, and if you are that person, you will find a way, college or not.

A Ph.D is a filter in that respect, as you have to work hard to achieve it.

And I there are many hard working shop floor workers, but they never make it to management. Just working hard on it's own does not earn you more money.

I agree entirely. Income increases by the unique value that you can bring to the table, not the degrees you have hanging on the wall.

If everyone in the world studied the exact same subject in college, incomes would remain the same as if those people had not gone to college at all. The market forces would remain unchanged.

What I mean by work is to work to set yourself apart. Maybe you need to hit the gym to become unique that way. Maybe you need to work on your singing skills to become unique that way. College can also bring you unique attributes, but it is no more special than any other avenue, at least with respect to income.

Again, college has nothing to do with it on a macro scale. I won't deny anecdotal instances can use college to their advantage. It definitely happens. Random degree holder is not going to be any better off though.

No one gets an "average" degree, so it doesn't much matter what the average is.

Some degrees are good investments. It depends on both the person and the degree.

How much of that is due to having more knowledge, and how much is classism? i.e. having upper class parents is probably a very high return aswell.

Also that only really works once. If spent 40 years, doing 10 4 year degrees, by this logic, I'd be a multibillionare right? Something is wrong with this theory.

"having upper class parents is probably a very high return as well"

True, which is why the studies account for factors such as family education and family income in order to attempt to isolate the impact of the one factor being measured: the subject's education level.

> Also that only really works once. If spent 40 years, doing 10 4 year degrees, by this logic, I'd be a multibillionare right? Something is wrong with this theory.

I can't imagine that the authors claimed anything more than that.

it would only work 3 times, Bachelor, Masters, PhD. Also if your income is 0, then however high the multiplier is, the result is still 0.

People treat college like it's a checkmark to check off. If try get through four years of it they will make good money for the rest of their lives. False. College is about learning. If you just scrape by and don't learn anything from it, you'll be no better off four years later. In fact, you will probably be worse off, with six figures of debt and no salary.

Interesting, but it doesn't necessarily take into account the opportunity cost due to the very significant time investment.

But more importantly, you know there's something wrong with the system when so many feel they have to try to justify the cost. Meaning, I think many realize that the investment is in the credential, not the learning that takes place due to the institution. I long for the day when a sufficient alternative will come to satisfy the average student (I'm working on this myself...)

The opportunity cost does not have to be more than one's liesure time. I worked thirty hours a week as a waiter in engineering undergrad and was a part time single dad. I averaged 17K a year. This is not unusual.

Opportunity is opportunity. If you weren't in school, you could have worked 30 hours per week as waiter plus the time you were studying.

Realistically, if we assume you work for minimum wage, you're going to be around $200K short by the time you finish a four year program, and that does not include any costs associated with actually going to school, which could easily run you another $100K+, depending on the circumstances.

Perhaps nothing you cannot overcome with the right program and a solid plan, but if you're going to college just because that's what people out of high school do, you should probably think long and hard about it.

This is incorrect. It is unlikely the average individual will work more than forty hours, so the opportunity cost is realistically the difference: 10 hours. At 7.25 an hour, pre-tax annual that's a mere $4k, for a four year degree that's $16K. Out of undergrad I went from a possible annual income of $20K (qualified for nothing but waiting tables) to $50K. The opportunity costs were paid for in the first six months.

It is unlikely the average individual will work more than forty hours

Unless you were only working for 10 hours at your course, this is false. You could have a 40 hour per week job plus the 30 hour per week job at night. You were working anyway.

Minimum wage is actually $10/hr. here, so that skews things slightly, but let's assume $20K per year anyway since you mentioned it. It's been a while since I've done the math, so I was actually off by a bit. It turns out to be about $108K by the time you graduate given the current state of things.

However, if we assume you live to be 80, it actually works out to be about $640,000+ that you lost out on by not working for those four years.

In your case, you are definitely ahead, but can the average student claim the same? I'm not confident that they can. More importantly, were you really stuck at $20K for the rest of your life? If you had the chops to go to college, it seems like you probably had the chops to find yourself in better standing anyway. The first four years of my career didn't pay much more, but I leveraged that experience to move to a six figure income soon after.

The concept of opportunity cost has nothing to do with the "average individual" it is the cost of the "next best alternative usually forgone". I did not go to college, during most of my "college years" (18-22) I worked a total of 50-80 hours at as many 3 different jobs. That was my next best alternative. I still work 50-70 hours, between different jobs and businesses and transitioned from working class to upper middle class. In retrospect, I can see, for me, the opportunity cost of attending college would have been very high...

I agree, individuals need to evaluate the opportunity costs for themselves based on their own circumstances.

For a policy discussion, the average or median is relevant; and you are an outlier. The median income for 25-34 with just a high school education was $25K in 2009[1].Average work week is internationally around 40 for 25-34 year olds (post-industrial) [2]

1. http://nces.ed.gov/fastfacts/display.asp?id=77 2. http://stats.oecd.org/Index.aspx?QueryId=9694

[EDIT] I am terribly average, hence my personal experience above serves as a humanizing tale to convey the statistical average.

If you read the study you'll find it does take into account opportunity costs.

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