2008 Woodie Awards
Economist examines pay off of elite educations
Rachael Jennings
Issue date: 11/15/07 Section: Features
However, because it is almost impossible for a potential employer to evaluate the "productive capacity" of an applicant based solely on his or her academic credentials, the Signaling or Screening Hypothesis proposes that education actually adds nothing to productivity, but merely serves as a signal that a worker is innately more productive to a prospective boss.??
Spence's model assumes that there are two varieties of workers - the more productive worker, and the less productive. If no indication of this disparity exists, the employer pays them both the same wage of 1.5, an average of one (the deserved rate of the less productive worker) and two (that of the more productive worker).
According to the model, the more "productive" worker (as determined by his or her elite college degree) might earn lifetime wages totaling two. However, one must subtract the cost (0.5) of his elitist education to determine his true wage of 1.5 - the same earnings he would have accumulated without his Ivy degree. The Spence model proves that he is no better off than his colleague.
During the final phase of Woodbury's presentation, he offered counterevidence to support that graduates of elite schools do, in fact, earn more than those of lower-tiered schools, presenting research conducted by a number of noted economists.
Dan Black and Jeffrey Kermit Danier have concluded that alumni from "competitive" schools earn about 15 percent more than those graduating from "less competitive" institutions, while those studying at the colleges deemed "most competitive" earn 22 percent more. Still, as researchers Dale and Krueger of Princeton University have deduced, there is little reward for attending an expensive and selective college.
"It's not the school that has the magic touch," Krueger wrote. "It's the students."??
Woodbury then referenced Carol Hymowitz of The Wall Street Journal who, in her article "Any College Will Do," reported that while 10 percent of the CEOs who lead the top 500 companies received undergraduate degrees from Ivy League colleges, more received their B.A.s from the University of Wisconsin than from Harvard.
Spence's model assumes that there are two varieties of workers - the more productive worker, and the less productive. If no indication of this disparity exists, the employer pays them both the same wage of 1.5, an average of one (the deserved rate of the less productive worker) and two (that of the more productive worker).
According to the model, the more "productive" worker (as determined by his or her elite college degree) might earn lifetime wages totaling two. However, one must subtract the cost (0.5) of his elitist education to determine his true wage of 1.5 - the same earnings he would have accumulated without his Ivy degree. The Spence model proves that he is no better off than his colleague.
During the final phase of Woodbury's presentation, he offered counterevidence to support that graduates of elite schools do, in fact, earn more than those of lower-tiered schools, presenting research conducted by a number of noted economists.
Dan Black and Jeffrey Kermit Danier have concluded that alumni from "competitive" schools earn about 15 percent more than those graduating from "less competitive" institutions, while those studying at the colleges deemed "most competitive" earn 22 percent more. Still, as researchers Dale and Krueger of Princeton University have deduced, there is little reward for attending an expensive and selective college.
"It's not the school that has the magic touch," Krueger wrote. "It's the students."??
Woodbury then referenced Carol Hymowitz of The Wall Street Journal who, in her article "Any College Will Do," reported that while 10 percent of the CEOs who lead the top 500 companies received undergraduate degrees from Ivy League colleges, more received their B.A.s from the University of Wisconsin than from Harvard.
Viewing Comments 1 - 2 of 2
James Close
posted 11/19/07 @ 9:25 AM EST
I think one of the questions that Woodbury didn't ask, but should have, is, "What is the value ($$) of networking that exists at the elite institutions, versus other schools?". (Continued…)
Anon
posted 11/27/07 @ 2:15 PM EST
Precisely, James. It's often whoM you rub shoulders with that matters.
Post a Comment