

Community college alumnae earn $6k more per year than high school grads - toni
http://www.eurekalert.org/pub_releases/2009-10/w-acc102209.php

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stanleydrew
As a former PhD student in economics I can tell you that this kind of research
is often not very well done. Having not read the paper I will reserve final
judgement, but based on the journal it's published in this probably doesn't
hold much weight. Here's why:

In order to say anything causal (as the author of this paper would like to) in
a field where you can't run experiments and only have observational data you
need to have a source of identification. It's not enough to compare means. Yes
this has everything to do with unobserved-variable bias.

In labor economics the huge unobserved variable is ability. People who are
naturally more "able" will likely earn more than less able people and also
will likely obtain more education. If that is true then it will look like
education is much more important in determining earnings/wages than it
actually is.

So there are all these ways of trying to eliminate that unobserved-variable
bias. The popular one in the 90s and early 00s (and still popular today
despite a lot of criticism) is the instrumental variables technique. Here's
the idea:

We need to introduce a source of randomness into our otherwise non-random
data. If we can find a variable that is correlated with the causal variable we
are interested in, but (arguably) uncorrelated with the unobserved variable,
then we can use that new variable as an "instrument." I won't get into the
technical details of how to run the regressions with actual data, but this
method basically uses an external source of randomness to attempt to say
something causal.

The classic paper on this is Josh Angrist's and Alan Kreuger's paper
estimating returns to education. They used Vietnam draft lottery numbers as
their instrument, since your draft lottery number should be completely
uncorrelated with your natural "ability," but definitely would correlate with
how much education you got (those having to serve couldn't go to school). More
on that paper is here: <http://econpapers.repec.org/paper/priindrel/670.htm>.

So basically I doubt that this community college paper does much of the
required analysis to actually "identify" the causal relationship it is
claiming to have found.

UPDATE: Having read the methodology (page 7) portion of the paper (link to the
pdf at the bottom of this page:
<http://userpages.umbc.edu/~marcotte/pubs.htm>) I can confirm that my doubts
were justified (the author also makes some highly questionable assumptions in
order to estimate individuals' work experience as well, but I won't get into
that). The author does acknowledge that unobserved variables will confound the
results, and attempts to eliminate the bias by controlling for underlying
ability with standardized high school math and reading exam scores. This is a
common method, but it's really not good enough. We are still dealing with
observational data, and we still haven't been presented a source of
identification. That is, even if two people scored exactly the same on their
high school math and reading exams, but one went to community college and the
other didn't, you still haven't accounted for whatever underlying differences
existed to lead each to make a different choice.

~~~
mediaman
Wonderful commentary, thank you!

Can you describe some other techniques used to eliminate unobserved variable
bias, or do you know of a resource that describes these?

I remember in one of the other studies on the impact of "elite" education
versus state-provided university education, they used people who were accepted
to an elite university, but chose not to attend. Is that using "acceptance" as
an instrumental variable?

~~~
stanleydrew
I've been out of the econ phd world for a little while now (see blog post
here: [http://hellosorld.com/personal/2009/07/16/why-i-quit-my-
phd-...](http://hellosorld.com/personal/2009/07/16/why-i-quit-my-phd-in-
economics.html)) so it's hard to remember what all the resources were, but
i'll ask around for some good material and post it here. Natural random
experiments are another good source of identification (i.e. elimination of
unobserved variable bias).

For the elite vs state university question, choosing to attend isn't an
instrument since it's still an observed decision. If there was some source of
randomness that was uncorrelated with all your other variables besides
attending vs not, then that would be an instrumental variable. Say the
government decided to take a pool of 10,000 elite college acceptees, gave them
each a number from one to 10,000 and then said only the even numbers could
actually attend. That would be your instrument. Trouble is that those kinds of
natural random experiments don't occur often. That's why economists can get
tenure simply by finding a good instrument for some study.

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andreyf
Ugh! Repeat after me: correlation does not imply causation, correlation does
not imply causation, correlation does not imply causation.

People who work straight out of HS are very different from those who decided
to save up money and go to college, even before they go to college.

~~~
jwesley
There is a high likelihood of causation though, simply because many jobs
(especially in the healthcare industry) require an associate's degree. For
many people earning those degree help them go from minimum wage jobs to 30-40K
per year.

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goodside
Yes, the confusion of correlation and causation that you find in every article
on post-college earnings certainly causes the benefit of college to be
overstated, but that's not even the real problem. Even with an ideal
randomized experiment that shows the exact size of the causal effect on
individuals, we would know little about the causal effect on a macro level.

Imagine if all doctors had to put $10,000 into a fire pit or else be
prohibited by law from practicing a certain lucrative form of medicine. If you
ran a controlled randomized experiment, you could easily establish a causal
(yes, _causal_ ) relationship between throwing money in the fire pit and
increased future earnings. This would not make throwing money in the pit any
less stupid.

College is a resource sink that no rational individual acting in their own
self-interest (with a few rare exceptions) can refuse. It's rational for
individuals to go to college to get better jobs, and it's rational for
employers to discriminate against non-grads to avoid bad employees, but at the
end of the day we're still throwing money into an ever-growing fire pit of
crushed beer bottles, cannabis seeds, and Playstation controllers.

~~~
stanleydrew
You kind of contradict yourself. I'm sensing that you feel college education
is purely a signaling mechanism, and I don't disagree completely. You
correctly acknowledge that the behavior of both the signal's sender and
receiver (student and employer respectively) is rational, but then lament that
we are throwing money into a fire-pit as though we could all agree to just
stop using this signal and save money. The reason we have the signal in the
first place is because high-quality individuals want a way to differentiate
themselves, and they have rationally decided that such differentiation is
worth the cost.

~~~
goodside
To the extent that it's only a signaling mechanism, though, it doesn't make
sense to subsidize it. Encouraging everyone to go to college with the state
paying half their tuition doesn't confer any benefit on the public. It just
appears to because it's inflating a common metric of intelligence, thus
providing impetus for further subsidy, and so on. It's as if the government
noticed that people with large diamonds are happier, healthier, and smarter
than people without (which they probably are), so they started subsidizing
diamond mines for the good of the public.

It might be advantageous for any given peacock to have a bigger, flashier, and
more cumbersome tail than the next peacock, but the arms race makes it ever
more certain that the peacocks will go extinct if a new predator shows up.
Money that's spent on escalating signals is money that could be spent on other
things, and once the public cost becomes high enough that people get disgusted
and stop respecting the signal (e.g., large SUVs) its value plummets.

I don't think college is at the breaking point just yet, and it might still be
rational to get that generic bachelor's. But if tuition continues to rise at
its current rate, which greatly outpaces inflation, there will come a day when
the bubble bursts.

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seldo
The finding that an incomplete degree still has an effect on earning is the
most surprising to me. I thought college had mostly devolved into a signal
about how committed you were to your career, but clearly at least some courses
are imparting actual skills. Maybe the effect is greater in community colleges
because they tend towards degrees in more practical subjects? (I don't know
anything about community college, I'm not from the US)

~~~
tjr
I attended a community college (mostly during high school) and also have
taught at one.

In my experience, the community college offers two general styles of education
programs: one is more or less equivalent to the first two years of a 4-year
college, and the other is primarily focused on skill development.

Many students who plan on completing a 4-year degree start at the community
college for a year or two, because they can complete a lot of the general
education requirements for the 4-year degree cheaper and/or easier.

Other students attend a community college basically to learn a trade. While
the college might have a 2-year program in computer science, they may also
have a 2-year program in "computer programming", offering classes like
"Introduction to IBM AS/400", "COBOL Programming", "Java Web Services", etc.
For some IT jobs, this sort of training is really more useful (at least in the
short term) than a study in computer science.

Other "trade" programs that I saw included culinary arts, industrial
craftsmanship (welding, usage of AutoCad, etc.), dental assistantship... these
are basically terminal associates degrees, and the college tells you up front
to not expect these classes to transfer toward any other university program.

~~~
elblanco
You also forget the adult education population that are there for career
changes because theirs was cut short, further education for promotions etc.
and the foreign student population attending to learn English. The community
college system in my area if packed with ESL students from Asia and Africa
looking to either return to their home country with a new skill, or move into
better life in the U.S. using the CC system as a way to open the doors into
the 4-year state schools they wouldn't have been eligible from coming fresh
off the boat.

IMHO, community college systems are one of the backbones of the American
Economy. Cheap, customizable, readily available, flexible and practical
education that nearly anybody can benefit from at any age in almost any
subject.

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rokhayakebe
Take 1M high school graduate and compare their salary with 1M community
college graduate and you probably are right. Fast forward 20 years later, and
I am sure the difference will be extremely significant.

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Anon84
Mandatory XKCD comic... <http://xkcd.com/552/>

