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Does Where You Go To School Matter? (And Why Reporters Get This Wrong…)

August 15th, 2008 · 29 comments

The Person or the Pedigree?Harvard

A recent article in the Wall Street Journal reports the results of a major compensation survey. The clear conclusion was that students who attend selective schools make more money than those who do not. Specifically, they found that an Ivy League graduate will enjoy a median starting salary 32% higher than that of other liberal arts graduates.

(Interestingly, after this initial advantage, the rate of salary growth remains constant over time. Ten years after graduation, for example, Ivy Leaguers’ salary advantage over other students remains at 34%.)

In terms of which schools reported the highest earnings, I was quite pleased to discover that graduates from my alma mater, Dartmouth College, have the highest median income: $134,000 10 years after graduation.

Suck it Harvard.

These results, however, belie a more significant question: do Ivy League students make more money because of the school or because of their talent? That is, would a student who could get into Dartmouth make the same salary even if he attended somewhere less selective? Or is the pedigree more important than the person?

The Most (Mis-)Cited Study Ever.

The standard answer is that the person trumps pedigree. For example, consider this article from the Brookings Institute, written by Gregg Easterbrook, a visiting scholar and contributor to The Atlantic Monthly.

The piece is titled “Who Needs Harvard?” It starts with the standard admissions-season reporter condescension — “winning admission to an elite school is imagined to be a golden passport to success…” — then throws in the requisite contrarian idea:

But what if the basis for all this stress and disappointment—the idea that getting into an elite college makes a big difference in life—is wrong? What if it turns out that going to the “highest ranked” school hardly matters at all?

Easterbrook proceeds to break out the big guns: a 1998 study by Stacy Berg Dale and Alan Krueger, of the Mellon Foundation and Princeton, respectively. The study is titled “Estimating the Payoff to Attending a More Selective College,” and as Easterbrook gleefully exclaims: “[it drops] a bomb on the notion of elite-college attendance as essential to success.”

He continues:

Krueger and Dale studied what happened to students who were accepted at an Ivy or a similar institution, but chose instead to attend a less sexy, “moderately selective” school. It turned out that such students had, on average, the same income twenty years later as graduates of the elite colleges.”

Question answered! Right? Busting your ass to get into Harvard is for losers. Real talented people will find success regardless of whether they engage in the chaotic admissions-related activities that reporters like Easterbrook find so objectionable.

But is this true? Or did the reporter read only what he wanted to read…

Fun with Statistics

As the Half-Sigma blog puts it, the Dale and Krueger report is “possibly the most mis-cited study ever.”

I agree.

I recently re-read the report, and I came away with the exact opposite conclusion as Gregg Easterbrook. In my opinion, Easterbrook clearly cherry-picked the results to support the answer he wanted to find.

The statistic he cites has to do with students who got accepted both to schools with high average SAT scores and those with low average SAT scores, and then chose to attend schools with the low scores. As the researchers note, however: “the average SAT score is a crude measure of the quality of one’s peer group.” By contrast, when they analyzed the selectivity of the college — i.e., position in the Barron’s College Guide rankings — Dale and Kruger found:

Men who attended the most competitive colleges earn 23 percent more than men who attended very competitive colleges, other variables in the equation being equal.

Remember, this is a regression analysis. This means that the researchers are looking at students who were accepted at both highly ranked and less highly ranked schools, and then found that those who chose to attend the higher ranked schools earned significantly more than those who chose the lower ranked schools. The researchers argue that ranking is a better indicator of selectivity than average SAT score as it better captures society’s common understanding of the school’s prestige.

In other words, Gregg Easterbrook is wrong. He cherry-picked a value that the researchers themselves labeled an outlier, and ignored their main findings.

The New York Times Gets it Wrong Too

Easterbrook is not alone. In 2006, the New York Times published an article titled: “Off the Beaten Path.” Once again, it opens with the standard admissions-season reporter condescension: “If you live and die by status, if the name Harvard, Yale, Stanford or Penn must hang etched in sheepskin on your wall, then read no further.”

(Ouch! You really called us out on our foolishness! You’re so clever Mr. New York Times reporter!)

The article then cites — you guessed it! — Dale and Krueger, noting:

A 1999 study by Alan B. Krueger of Princeton and Stacy Dale of the Andrew W. Mellon Foundation found that students who were admitted to both selective and moderately selective colleges earned the same no matter which they attended.

This is 100% wrong! It’s clear that they’re just aping Easterbrook’s bad reporting without even bothering to read the original study. (The term “moderately selective” is used by Easterbrook, in the actual study, however, the range used was “most competitive “highly competitive,” and “very competitive;” the word “moderate” does not appear on the scale.)

Lest you think that the reporters merely missed a minor conclusion hidden in the middle of the study, let me quote the abstract — yes, the abstract, the very first paragraph of the report, the can’t-miss summary of its main finding. It states:

[The] rating of school selectivity and the tuition charged by the school are significantly related to the students’ subsequent earnings.

How do we get from that to the NYT’s conclusion that “students who were admitted to both selective and moderately selective colleges earned the same no matter which they attended?”

Whether We Like it Or Not…

I don’t know why reporters sometimes seem so desperate to discount the value of wanting to attend a top college. I’d like to think that it’s born of good intentions — helping to relieve the stress of the college-bound masses. But I get the impression — from the haughty tone of these articles — that it has more to do with the reporters thumbing their noses at what they deem to be annoying behavior by parents who live in their elite Manhattan or D.C. neighborhoods.

You know my thoughts on this issue. It’s not my role to judge your ambitions. Instead, I focus on helping you pursue your educational goals — whatever they are — in a sustainable manner. To me, the big problem with admissions season stress is not that so many students want to go to Harvard, but that they think joining 10 clubs is the key to doing so.

It helps no one to ignore data that we don’t like. We should start with the truth — regardless of what it says — and then work forward from there.

(Hat tip to Half Sigma for first bringing this topic to my attention; photo credit goes to bdjsb7)

29 thoughts on “Does Where You Go To School Matter? (And Why Reporters Get This Wrong…)

  1. jin says:

    just a thought: 32% higher than median includes all colleges in America, some of which may be a lot less selective. but how about more selective colleges like top lacs, UC Berkeley etc? would choosing to go to such schools instead of ivies matter as much then?

  2. Study Hacks says:

    32% higher than median includes all colleges in America, some of which may be a lot less selective. but how about more selective colleges like top lacs, UC Berkeley etc? would choosing to go to such schools instead of ivies matter as much then?

    To be clear, the group they examined in this study was not “all colleges in America,” but instead: “300 U.S. schools ranging from state institutions to the Ivy League.” You are right, however, that schools like Berkeley are right up there with the Ivy League. Indeed Berkeley is above Cornell and pretty close to the rest of the Ivy League in both starting salary and mid-career salary.

  3. Great and thoughtful article. It seems often overlooked that people think just because you make it into a Ivy, you are going to be rich. Maybe that is the case, but I always considered brain power more important. Look at Bill Gates: got into Harvard, dropped out, became world’s richest man. My point is that him getting into Harvard showed that he has the brain power to be wealthy, but dropping out and starting Microsoft was probably the smartest thing he ever did.

  4. Study Hacks says:

    Great and thoughtful article. It seems often overlooked that people think just because you make it into a Ivy, you are going to be rich. Maybe that is the case, but I always considered brain power more important.

    My best read of the data is that the name alone of a top school will give you a 20 – 30% bump in earning. Beyond that, as you note, it’s up to the individual.

  5. patrick says:

    Cal, do you have any thoughts on why this is, or any ideas on how to overcome this earnings gap? Is it just because the most selective colleges also usually have large endowments and more funds and can therefore provide a better education than less financially affluent schools? Or is it because the expectation at harvard is that you will go on to be successful, while at a community college people are hoping to get into a good job? People who are expected to be successful usually are, while those expecting to be unsuccessful usually are too. just some food for thought.

  6. Dottywine says:

    I go to SMU and I thought “Wow, they lied to me. If I went to UNT (a public school) I probably would not have all the opportunities SMU is able to offer me because of the amount of money and prestige they have over UNT…! What would happen if I got into Yale?”

  7. ThiloP says:

    In my opinion this is just another proof for the Pygmalion-effect. Ambitious students have the same chances everywhere. But average ambitous students get pulled through at those Ivy League Colleges. They would have a hard time at a “less wealthy” school.
    But I have to admit that it takes usually quite a lot ambition to get into one of those top schools anyway.

  8. ThiloP says:

    It takes quite some ambition if your parents can’t “support” the University with some genorous financial gifts…Come on everybody knows how things work!

  9. Jason says:

    I think too much fuss is made over the ivy vs the rest argument. Certainly there was time when getting an excellent education meant going to an ivy, or flying over to europe. But with the influx of european talent since ww2 many other institutions have raised the quality of their programs. This is trend that will likely continue. However attending an ivy league school will have other benefits that other universities may not offer. These additional benefits will stem from the stereotype of an ivy league student, driven and intelligent or a future mover and shaker, and the social benefits of attending a school of high achievers, something like what they call the old boys club. Also the ivy league intake is rather small, some 25-30 thousand students, and so they students are of certain caliber. Then what comes to pass with these students is probably like a self fulfilling prophecy. I can imagine an example of twin brothers, of equal intelligence and ability, once attends an ivy and the other a state school. In the near future the ivy graduate will likely have a rosier path ahead of him. This may change as more universities join the ivies in selectivity and research output. Of course, there is the question of how many universities the public mind is capable of considering elite. I’m sure there is something of squeeze factor involved, which probably has to with human memory and the hold to power and prestige.

  10. Study Hacks says:

    Cal, do you have any thoughts on why this is, or any ideas on how to overcome this earnings gap?

    My experience: reputation makes it easier to get certain elite high paying jobs. Lots of people from top schools take these jobs. Enough, in fact, that the median salary can increase. (I’m talking like banking and consulting…) If you want these jobs, and you’re not at a top school, it’s going to be real tough. Otherwise, you probably don’t have to sweat it.

    But average ambitous students get pulled through at those Ivy League Colleges. They would have a hard time at a “less wealthy” school.

    I don’t think that matches my experience. Maybe…

    It takes quite some ambition if your parents can’t “support” the University with some genorous financial gifts…Come on everybody knows how things work!

    That probably describes at most a handful of students at schools like Harvard. The admissions process is need-blind. If you’re from a famous family, however, they will know this and it can help. But how many students at these schools are from famous familes? 5 per class? 10?

  11. YouAreBiasedForDartmouth says:

    cal, you are misciting the study in the new york times about dartmouth, if I recall reading it correctly. you forget two things:
    1) the study only focuses on people who do not pursue higher education that college. more are likely to do that from harvard, so you are leaving the bottom of harvard with a comparatively better group of dartmouth students.
    2)harvard students are more likely to do non-finance related jobs. dartmouth culture is very much all about finance. the fact that dartmouth makes more doesn’t mean that a student choosing between the two will make more if he goes to dartmouth; it would likely be the opposite with harvard’s greater access to PE, HF, and VC straight from college.

  12. Half Sigma runs a great site, but he’s dead wrong about the Krueger study.

    Apparently one of the people “misquoting” the study is the author himself. Check out what Alan Krueger said himself in a NYT article and then look at the chart he provides.

    -Mercy

    Article:
    http://partners.nytimes.com/library/financial/columns/042700grads-econoscene.html#offsite

    Chart:
    http://partners.nytimes.com/library/financial/columns/042700grads-econoscene.2.GIF.html

    Better Pay for a Better College? Not Really
    # Chart Does Prestige Really Pay?
    By ALAN B. KRUEGER

    Your son or daughter has just been accepted to both the University of Pennsylvania and to Penn State. The deadline for decision is May 1. Where should he or she go?

    Many factors should be considered, of course, but lots of parents and students are particularly interested in the potential economic payoff from higher education. Until recently, there was a consensus among economists that students who attend more selective colleges — ones with tougher admissions standards — land better paying jobs as a result. Having smart, motivated classmates and a prestigious degree were thought to enhance learning and give students access to job networks.

    But is it true?

    A study that I conducted with Stacy Dale of the Andrew W. Mellon Foundation, “Estimating the Payoff to Attending a More Selective College” (available online at http:// papers.nber.org/), has unintentionally undermined this consensus.

    ….

  13. superdestroyer says:

    You should look at career fields with normally distributed incomes and those with log-normally distributed incomes. If one is accepted to the most competative university, one should plan on a log-normal career field (one where the mean salaryis well above the median salary). However, if one is not accepted to the most competative university, one should think about a normally distributed career field.

    As an example, the Ivy league has only one undergraduate nursing program because nursing is normally distributed. One does not get more starting pay as a newly graduated nurse from Penn or Georgetown versus Temple or George Mason. The same can be said for fields like Pharmacy (no Pharmacy schools in the Ivy League), Physical therapy, or civil engineer. Those are fields with licenses are what is required.

    However, if one wants to go into consulting, investment banking, or law, one had better get admitted to the most competative school because a graduate of George Mason or Temple has no chance of competing with a graduate on Penn. or Georgetown in those fields.

  14. Study Hacks says:

    Apparently one of the people “misquoting” the study is the author himself. Check out what Alan Krueger said himself in a NYT article and then look at the chart he provides.

    The chart and this article focus only on the SAT numbers. In his original study, Kruger said the SAT numbers were a bad indicator and emphasized that selectivity based on school ranking gave a significant earnings increase. My guess is that after he saw the attention he was receiving for a “selectivity doesn’t matter message,” he decided to focus on SAT numbers only to keep the spotlight bright. It’s not misquoting, it’s just academic marketing. A common occurrence, but somewhat distasteful.

  15. Study Hacks says:

    You should look at career fields with normally distributed incomes and those with log-normally distributed incomes. If one is accepted to the most competative university, one should plan on a log-normal career field (one where the mean salaryis well above the median salary). However, if one is not accepted to the most competative university, one should think about a normally distributed career field.

    This may be true. Certainly more students at elite universities take jobs with much higher earning potential, and this could skew the median — though it’s affect would be much more pronounced on the mean.

  16. superdestroyer says:

    Study hacks,

    Look at going to law schools. A large number of graduates never practice and many who do graduate end up working for middle class pay as government attorneys, family lawyers, etc. But a few lawyers get very rich. Thus the mean is going to be much higher than the median. If one gets into Harvard or Georgetown, one should think about law school.

    However, a Dentist gets the same reimbursement from the insurance company whether they went to Harvard of Suny-Buffalo. Paying Harvard prices to go to Dental School or to become a dentist is a waste of time. The credential does not generate more income. One can go to directional state university and become a pharmacist, speech pathologist, or physical therapist and make six figures. However, those programs are usually not offer at elite universities.

  17. Study Hacks says:

    Paying Harvard prices to go to Dental School or to become a dentist is a waste of time.

    Okay, now I see what you’re saying. I agree. This is a good point. Don’t sweat the Ivy League if you’re interested in a career with a fixed income caps.

  18. superdestroyer says:

    I do not know if fixed income tax is the term.

    A good example is pharmacy. It is a fix figure job and now requried a pharm.D. However, all th employer needs is a pharmaicst that is licensed. Having a degree from a top tier school (not that any of them have pharmacy schools) is all a person needs to get a job. Attending the University of Michigan Pharmacy school or the University of Texas does not get anyone a higher pay check or a better job. The same applies to becoming a Nurse Anesthetist (a six figure job where a graduate of Incarnate Word University gets the same as everyone else. In those fields, the mean pay and the median pay are the same and the pay for pharmacist is normally distributed (bell curve). The difference in pay has to to with year experience, management, or speciality such as oncology.

    However, look at majority in Drama. Unless you are at an Ivy league such as Yale, NYU, or USC, you are probably wasting your time. Most SAG members make almost nothing but a few make tens of millions. thus, the mean pay is much higher than the median pay (a right skewed log-normal distribution with a very long tail.

  19. Study Hacks says:

    thus, the mean pay is much higher than the median pay (a right skewed log-normal distribution with a very long tail.

    Right, I agree. When I said “cap,” I wasn’t referring to income taxes, just the property of a normal distribution that values far from the mean are, effectively, unobtainable.

    1. Jambalaya says:

      Obviously incomes that are several standard deviations above the mean are “effectively unobtainable.” That’s the whole idea behind means and standard deviations. This is the case in every field, the difference is how much variation there is career to career — do you have any data of average incomes and corresponding standard deviations to support the claim that incomes within medical fields tend to not deviate from the mean as much as other careers?

  20. Ryan says:

    While many may get the incorrect conclusions from the study, you seem to assume that the goals of students should be to attend the schools which will maximize their future incomes. And that is as false as any statement in the NYT or by Brookings.

    I turned down Yale after getting in early action, Dartmouth after receiving a likely letter and plane tickets to visit for their admitted students’ weekend, and Williams after receiving a full scholarship that would have funded both my undergraduate and graduate studies. To Dartmouth and Yale I received nearly 100% financial aid.

    Instead, I am at UNC-Chapel Hill, having the time of my life and learning more than ever. And if I make a little less money twenty years from now, that’s ok. That was never my priority. And it should rarely be the main consideration for high school students.

  21. Study Hacks says:

    you seem to assume that the goals of students should be to attend the schools which will maximize their future incomes

    Where do I assume that? My post shows how this study is miscited and speculates why these miscitations occur so often.

    In fact, I even go so far as to state in my conclusion:

    It’s not my role to judge your ambitions. Instead, I focus on helping you pursue your educational goals — whatever they are — in a sustainable manner.

    I think it is possible that like the reporters misciting Kruger, you’re seeing the boogey man argument you want to see…

  22. george says:

    the reason these elite colleges have such high populations of scoring students is because they cherrypick these students through tough selection examinations before admitting them in the first place .let them bring down the bar, allow average studens to enter like other less famous colleges and then well see how things turn up.

  23. GovGuru says:

    Who’s really misinterpreting the report?

    For starters, the link to your report is dead. You can find a pdf of the report at http://cdn.theatlantic.com/static/mt/assets/business/dalekrueger_More_Selective_College.pdf

    Second, here’s the actual abstract:
    Estimates of the effect of college selectivity on earnings may be biased because elite colleges admit students, in part, based on characteristics that are
    related to future earnings. We matched students who applied to, and were accepted by, similar colleges to try to eliminate this bias. Using the College and Beyond data set and National Longitudinal Survey of the High School Class of 1972, we found that students who attended more selective colleges earned about the same as students of seemingly comparable ability who attended less selective schools. Children from low-income families, however, earned more if they attended selective colleges.

    Let me draw out the important sentences:
    “students who attended more selective colleges earned about the same as students of seemingly comparable ability who attended less selective schools”

    Now granted, the authors did find an effect for children from low-income family. But I do want to just point out an irony that an article complaining about other people misquoting the abstract of a study misquotes the abstract of that same study.

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