The Economist’s College Rankings: The Price of Everything and the Value of Nothing

Monopoly Man

What The Economist Says

US News & World Report, Forbes, Princeton Review, and other organizations rank colleges annually. Now The Economist has tried its hand at producing a new hierarchy of schools based on a different set of criteria.

http://www.economist.com/blogs/graphicdetail/2015/10/value-university

(This blog post also relies on the hard copy of the article that appeared in the October 31-November 6 2015 issue of The Economist.)

The Economist was intrigued by the claims made in an article published by the Quarterly Journal of Economics which seemed to question the degree to which colleges enhanced workers’ earning power. As The Economist puts it, the article suggested that graduates from Harvard University earned high salaries not because the school enhanced their skills but because it admitted very bright people to start with. Using data provided by the Department of Education’s “college scorecard” website, The Economist attempted to determine just how much a college elevates its graduates’ salaries. To use The Economist’s own words:

The government generated the numbers by matching individuals’ student-loan applications to their subsequent tax returns, making it possible to compare pupils’ qualifications and demographic characteristics when they entered college with their salaries ten years later. That information offers the potential to disentangle student merit from university contributions, and thus to determine which colleges deliver the greatest return and why.

The Economist then asserts that its “first-ever college rankings are based on a simple, if debatable, premise: the economic value of a university is equal to the gap between how much money its graduates earn, and how much they might have made had they studied elsewhere.” Figuring out how much graduates actually earned ten years out of school is the easy part. It is somewhat harder to determine how much they could have made if they had gone to a different school. The Economist, however, plucky as it is, used multiple regression analysis to determine that figure for 1,308 schools.

In determining the value added by a school, The Economist had to account for a number of variables that had some bearing on graduates’ salaries:

  • average SAT scores, sex ratio, and racial makeup of the school
  • the size of the college, whether it was a public or private institution, and its religious affiliation
  • the wealth of the state in which it was located as well as the wage rates of the town where the college is
  • the number of students who use Pell grants
  • whether the college has a ranked business school or is a liberal arts college

The Economist even developed a “Marx and Marley Index” that measured the extent to which schools had students who were disinclined to pursue lucrative careers in, say, business.

After filtering out these factors, The Economist determined how much of a return in earning power each school generated for its graduates. As The Economist points out, the bar is set very high for schools like Caltech (California Institute of Technology) because it is very selective (it admits the cream of the cream), it is close to a prosperous city (Los Angeles), and teaches subjects that often lead to high-paying jobs (science and engineering). In other words, the kind of student who attends Caltech should be expected to do very well whether he or she goes to Caltech or not. (And according to The Economist’s model, Caltech actually does not enhance its graduates’ earning power—median earnings ten years out are actually around $8,000 less than expected earnings).

The list yields some not-so-big surprises. MIT and Harvard, perpetual winners in other rankings, are close to the top. What is intriguing about the list is that a number of lesser-known schools do quite well. If one includes vocational colleges, pharmacy schools score highly (e.g. MCPHS University in Boston—which has placed this fact prominently on the home page of its web site). They are not particularly selective, but they practically ensure six-figure salaries for their graduates less than ten years out of school. The maritime colleges (e.g. Massachusetts Maritime Academy), which train engineers for careers in shipping, also lead to lucrative careers. In fact, graduates of SUNY Maritime in New York have higher salaries than the poor slobs at Caltech.

If we exclude these vocational schools, though, the picture becomes somewhat more speckled. Yes, schools that admit students with high SAT scores tend to have graduates who possess greater earning power. And, yes, schools that focus on engineering and business also seem to do well in the rankings. Having said that, graduates from schools that stress the humanities still go on to remunerative careers. The Economist suggests that if students from traditional liberal arts colleges do not fare particularly well according to this ranking, that’s because they are not focused on making money. David Oxtoby, Pomona College’s president, claims his school’s graduates are more interested in “changing the world, affecting people’s lives, and having a fulfilling career” than “on being compensated for their work.” (As you can guess, Pomona did not fare well in the rankings.)

Where Saint Anselm College Fits

Saint Anselm College ranked 171 out of 1,308 colleges or in the 86th percentile. To put this performance in perspective, here are how some other New England colleges performed:

36 College of the Holy Cross 97%
72 Providence College 94%
129 Colby College 90%
171 Saint Anselm College 86%
258 Stonehill College 79%
281 Middlebury College 78%
403 Bowdoin College 68%
421 Assumption College 67%
736 Saint Michael’s College 42%
997 Merrimack College 21%

In other words, Saint Anselm College does a better job of providing its graduates with earning power than a number of peer institutions. How or why this happens is unclear.

What Does It All Mean?

There is something to be said for measuring schools in this manner. The Economist points out that its rankings indicate a number of public schools have done an outstanding job of catapulting poor students into the middle class. Saint Anselm College can take some pride in the fact that it is better at performing this service than 86% of America’s colleges.

But earning power is not the only or even the most important means of measuring a college’s performance. The Economist is up front that its ranking does not measure anything but the degree to which a college enhances its graduates’ earning power. And earning power is not the be-all and end-all of college education.

Society needs engineers and businessmen, and such people rightfully earn big money. But society also needs nurses and schoolteachers, and these professions don’t earn huge salaries. Even more important, though, society needs people who can see its problems in the round. There is an idea circulating in Silicon Valley that the engineers and businessmen who are pushing the frontiers of the Information Age have the power to resolve many of our difficulties because they possess tools that nobody has ever had access to before. But a narrow training in engineering or business does not necessarily make one fit to use those tools—no matter how powerful they are—any better than anyone else. A broad understanding, but one that is also capable of training itself to study a variety of problems in depth, is what is wanted.

One Thing after Another is here reminded that it once had a colleague at another institution who used to claim that a liberal arts education enabled students to “learn how to learn.” Her argument was that the broad education students received at a liberal arts college did not provide them with all the knowledge they needed to tackle any problem. Rather, it allowed them to understand how to go about mastering different fields on their own. It is this skill that we need now more than anything else, and it is not cultivated by the intense study of one area. This skill, however, does not always lead to great earning power. In this context, David Oxtoby’s observations might be self-serving (Pomona finished 1241 and in the 2nd percentile) and a little overdrawn, but he has a point. “Changing the world, [and] affecting people’s lives”—both of which are important jobs—are not necessarily remunerative.

NOTE: In the interest of full disclosure, One Thing after Another must admit that it a) subscribes to The Economist and b) obtained a BA from Pomona College. 

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