How much of the college education premium is payoff to useful human capital?

[KrazyHorse]

I kicked it up a notch. BAM!

[DanS]

Dan, what do you mean by "good businesspeople"? People with ownership of a profitable business?

Even by that metric, I doubt what you say is true (assuming you correct for demographic skew toward older people)

I cross-edited you. By "good businesspeople," I mean good executive material -- e.g., the Bill Gateses of the world, who have not graduated college.

[Asher]

Steve Ballmer graduated college and he's demonstrably inferior to Gates.

[KrazyHorse]

Dan, the Bill Gateses of the world are highly exceptional. Almost all execs are college grads, and many have graduate/professional degrees.

If there was a large pool of available talent being untapped by the current system then some company could clean up by recruiting from it. As previously mentioned, college itself is extraordinarily expensive as a signaling mechanism, so there is loads of incentive to do this...

[DanS]

Yes, agreed that some company could clean up by recruiting from an untapped pool of talent if they have identified a reliable signal (if such an untapped pool exists). But I'm skeptical that a company would go against conventional wisdom to develop these signals. One big herd.

I guess I wonder whether some companies would be further ahead picking candidates randomly and then sorting them once they get in the door. Of course, the sorting has its own problems.

NB: Microsoft was led ably by Bill Gates. But it seems unlikely that Intel could be led ably by Bill Gates. So it may vary substantially by the business.

[Asher]

Yes, it's context-specific. People have inherent aptitudes for certain businesses and roles. Bill Gates was a software guy, he was good at it and usually had an innate ability to see where the industry is heading. It was that combined with good business sense in general (on how to compete) that was the key to his success -- not necessarily just the business skills.

[rah]

Yes, agreed that some company could clean up by recruiting from an untapped pool of talent if they have identified a reliable signal (if such an untapped pool exists). But I'm skeptical that a company would go against conventional wisdom to develop these signals. One big herd.

I guess I wonder whether some companies would be further ahead picking candidates randomly and then sorting them once they get in the door. Of course, the sorting has its own problems.

Companies do this informally internally. When I worked at an insurance company our call center was in our facility. Our developers worked closely with the phone reps because if we could make a change that would save 1 second handling a call, it would save millions of dollars. Very few of the phone reps had degrees but if they showed up every day and showed some aptitude we'd take a risk and moved then to computer operations looking to ultimately training them for development work down the road. If they didn't show promise on the phones or demonstrate that "reliable signal", the normal attrition rate took care of them. As a secondary benefit, the phone reps were quite aware of the potential opportunity, and it motivated quite a few of them to work better.

[Whoha]

flash, revealed ability commands a far higher salary. This increased salary is the means by which employers pay for the college education of their workers.

If the worker is truly valuable and in demand wouldn't their salary trend towards the higher level anyway?

[Jon Miller]

I am just going to talk about academia.

In academia, something like 90% of the professors come from a few schools. My advisor is an important person in MD, and she says that generally everyone that they interview would be a good pick (would be a successful professor). So they actually pick based on other things. Even little things, like how good your school that you got your degree was.

You want to give an employer every reason possible to pick you. Because there might be many people who would be successful at the position you are trying to get. Things like degrees, even for jobs where they are not necessary, does this. They see a number of people, all of when would be good candidates. One has a degree, and another doesn't, they will pick (all other things being equal) the person who has the degree, in general.

JM

[KrazyHorse]

No, Whoha. That is the whole point: without a college education it's difficult for young workers to signal their value to potential employers.

There are alternate methods, but they are also costly and time-consuming. The wide acceptance of university as the signaling method makes the alternate methods more expensive and time-consuming than they otherwise would be (companies put less effort into recruiting from non-college educated, as their average quality is lower).

[KrazyHorse]

I am just going to talk about academia.

In academia, something like 90% of the professors come from a few schools. My advisor is an important person in MD, and she says that generally everyone that they interview would be a good pick (would be a successful professor). So they actually pick based on other things. Even little things, like how good your school that you got your degree was.

You want to give an employer every reason possible to pick you. Because there might be many people who would be successful at the position you are trying to get. Things like degrees, even for jobs where they are not necessary, does this. They see a number of people, all of when would be good candidates. One has a degree, and another doesn't, they will pick (all other things being equal) the person who has the degree, in general.

JM

Yes, Jon: the value of university as signaling is POSITIONAL. Insofar as signaling is concerned, an increase in average quality doesn't change anything; it simply sets the bar higher.

[Ben Kenobi]

I think a company could clean up, but most managers don't like taking risks on folks outside of the normal parameters.

I'm not any smarter for having finished my degree, so why does the degree make me more employable? I don't get that at all.

FWIW, I don't think that job-wise that the degree was worth the paper it was printed on. I don't believe I learned any skills after finishing that I didn't already have going in.

As for the opportunities, I'm surprised that rah's company would work that way on the phones. Most don't. I've tried entry-level positions, and for the most part they are dead ends and your manager wants to invest in you about as much as he wants to get audited.

My last boss, same. He's great until you ask him to pay you for the work you've done...

[Asher]

I think a company could clean up, but most managers don't like taking risks on folks outside of the normal parameters.

I'm not any smarter for having finished my degree, so why does the degree make me more employable? I don't get that at all.

The obvious answer is, it obviously didn't.

FWIW, I don't think that job-wise that the degree was worth the paper it was printed on.

You got a dumb degree. Of course.

[Ben Kenobi]

Anyone other than Asher care to comment?

[Asher]

Not when I've said what needs to be said.