Truck and Barter

Is it really that important to graduate?

It's a question I find myself asking more and more as the projects pile up right before the end of the year...

In that vein, here's an interesting article in today's NYT: Many Collegians Do Not Graduate in 6 Years, Report Says


The article goes through a good deal of hand-wringing about the rates of graduation at colleges, as well as the differences in graduation rates between minorities:

Only 63 percent of full-time students at four-year colleges graduate within six years - a common yardstick for measuring graduation rates - the report says. And these rates have remained flat for more than 20 years.

Graduation rates are especially low for minority students and those from low-income families, the report says. Only 46 percent of black students, 47 percent of Latino students and 54 percent of low-income students graduate within six years.

20 years, you say? Sounds like a fairly stable equilibrium, to me. Without the data for the report, of course my reading will be off, but might I suggest a different interpretation? Perhaps we're simply seeing a long-standing effect of choice making by individuals weighing their value in the market versus the opportunity costs of continuing in school.

What the article fails to do, though such failures aren't surprising in our journalism corps, is to consider possible variation in graduation rates between various types of majors. An unpublished paper I read recently (yeah, that's a terrible thing to do, I know -- but I'm having a hard time finding any good economic reports that aren't blocked the way JStor and Ebscohost are. I promise to update when I come across some...) indicates that there are vast differences in the effect on future wages based on the quantitative substance of the classes a person might take. The more quantitative, the higher the wages (hourly wages, in the case of the study). It also indicates that there are varying effects based on the actual graduation of an individual. This is often referred to as a "sheepskin effect." That is, the difference in wages between a person with enough credits to graduate, and a similar person with the actual diploma, is nontrivial in the case of quantitatively heavy degrees.

This could indicate that we'd expect to see more "die-off" of students in the softer majors (English, History, Sociology, etc.) than elsewhere, since the process of skill acquisition might be different and perceivable to students. The price of an English major in their third year of school is little different than after graduation. Staying longer adds little to the future value of that person's work.

What prompts these people to leave? Certainly some people experience considerable financial or personal shocks, though I don't expect it to be at the levels that would prompt only 63% of entrants to remain. A seperate possibility is that the person got a job. That is, they found a way to earn money that seemed to be worth leaving school (making money instead of living on loans, possibly). By nature, then, those people who have left are those who are endowed with a natural motivation or ability to find work. Similar students (same major and other demographics, say), on the other hand, may lack a certain something that prompts them to find work. In which case, the people who remain to graduate with a less quantitative degree may not, in fact, be better off than those who left.

Also of importance is the difference in ability between the 4-year graduates, the 6-year graduates, and the 6+ year non-graduates. The curriculum at the vast majority of schools still allows for graduation in 4 years for a Bachelor's degree. Controlling for those students who work as well as attend school, it might be plausible to posit a difference in ability between those who graduate at 4 years, 6 years, and those who do not graduate at all. Again, controlling for those people who work, or who have possibly switched majors to a more technically challenging field, each successive year is worth less and less, but the student remains because 1) he is unable to complete the coursework, or 2) is unable to find a better option (such as a job), and chooses to remain in order to be doing something (potentially finding new skills that are in more demand, though continuing undergrad classes is often simply more variations of subject matter like Deontological Nature of the Victorian Novel, Small Wars of the 1400s, etc.).

This is especially telling:

Two campuses that have shown substantial improvement in recent years, the report says, were Louisiana Tech University (55 percent in 2002, up from 35 percent in 1997) and the University of Florida (77 percent in 2002, up from 64 percent in 1997). The University of Florida has worked to monitor its students better, improve advisory offices and provide more classes that students need.

In the first case, the degree is a technical one, and in the growth of the technologically-dependent economy such degrees are a certification process that could be highly lucrative. In the second, the school has a recognized "name" that could be improving in value over time. (This might also work as a postive correlation between school name and graduation rates in the negative direction, as the "name value" declines.) The difference in institution's rates could well be explained by the interest in graduating from a particular school. What's the value of having the name "Harvard" on a degree versus "Chicago State"? The quality of skills learned isn't the question then (and I certainly don't mean that Harvard grads are necessarily better skilled than Chicago State grads), only the value to a potential employer.

Programs at schools designed to make sure more kids graduate would seem to have little use, save for on the marginal student that is faltering between leave and stay. In that case, we'd expect the value of more school and work to be slight anyway, so the "sheepskin effect" probably wouldn't be large. Indeed, if the program starts building in extra incentives to stay (loans, lower prices, etc), it could be that the schools will only succeed in expanding the pool of lesser-skilled (in relation to school) students that exhibit less motivation.

And worse, regulation by States that link school process to loans simply induces greater entrance and retention of those people who don't have more lucrative outlets elsewhere or lacked the motivation for school absent the financial incentives. This exposes more motivated and higher skilled students to externalities such as larger class size, less access to professors, more thinly-spread campus resources -- and in the long run, a graduating cohort that is larger than the market would otherwise demand (since supply was stimulated by a State rather than the job market). Too many people in a cohort (say, the flood of recent college grads that happens every summer) entering the work force, as anyone can tell you, puts a downward pressure on wages. That's just not good for anyone, graduates and non-graduates alike.

[Editorial Update: Some changes made to clarify points I hurried through, some spelling mistakes, etc.]

Posted at May 26, 2004 06:07 PM

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