A costly way to identify intelligence

Most people don’t need a college education to do their job, but they need a degree to get hired, writes Daniel Indiviglio in The Atlantic. It’s a very expensive way to identify who’s smart enough to do a job, he writes.

. . . when high school standards declined and college became more popular, some applicants stood out above others as being more educated and potentially smarter than those with only a high school diploma. If the trend keeps up, however, a time will come when a college degree isn’t enough either: masters degrees will be commonly sought, as the value of college degrees fall to be worth as little high school degrees are today, since so many applicants will have them. If this trend keeps up forever, perhaps we’ll one day have locksmiths with PhD’s.

Waitresses with a college degree earn more money, but it’s probably not the degree, argues Andrew Gillen.

College is the best investment on the market (for those who complete a degree), counters  Derek Thompson, also in The Atlantic.  Over a working lifetime, “the typical college graduate earns $570,000 more than the average person with only a high school diploma.”

Let’s say you’re deciding where to invest $100,000 at age 18. Maybe you think to put it in gold, corporate bonds, U.S. government debt, or hot company stocks.

The $102,000 investment in a four-year college yields a rate of return of 15.2 percent per year, more than double the average return over the last 60 years experienced in the stock market” and more than five times the return in corporate bonds, gold, long-term government bonds, or housing, according to a report by Michael Greenstone and Adam Looney.

Note that the associate degree’s rate of return is 20 percent, higher than the pay-off for the  bachelor’s degree. I’d guess that’s because the costs of attaining the degree are lower and many associate degrees go to nurses, who make good money.

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