Probably why Chicago now offers a business economics major with much less math and economic theory than their regular economics major, with more overtly business course work instead.
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Sure, that makes the causal relationship unclear at best - but that isn’t the biggest problem.
Reducing the return on a college education to salary level is the biggest problem - even correcting for career choices (and figuring out what to do with all the career paths, not necessarily high paying but possibly very fulfilling and of high value to those who have them, that are only possible with a college degree).
An additional factor - these calculations all use averages. Since income almost always has a right-skewed distribution, the majority (often large majority) of the population has salaries that are lower than that average. In the best case scenario, the use of an average is of little use to an individual making their individual selections. When the average, even average ± 1 SD, only describes a minority of the population, these values have even less use for individual trying to make a choice.
That means that any value that is based on calculations that use averages salaries don’t have much value for parents of students who are trying to choose a college.
In short, one can only calculate the ROI from a college that is meaningful for an individual some 10 years after they graduate. However, the ROI that is calculated by these models built by WSJ is really not useful or meaningful for college-bound kids and their parents.
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Maybe not meaningful but certainly useful because many base decisions on them.
They just don’t realize every individual story is different.
Agree that the use of mean average (sum of all values divided by the number of values) tends to skew the displayed number upward, due to how one graduate with very high pay can skew the mean.
But note that College Scorecard and some colleges’ career survey reports use median (middle value) rather than mean.
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The ones using medians is more useful, but only for a general picture. The issue that a median still only says something about the graduates as a group still stands. It doesn’t predict what a prospective undergraduate’s income will be. These models also look at the median cost, not at what the cost will be for that individual applicants.
Even with the use of median, only a minority of the population has income that is relevant. For example, the median individual income of the USA is roughly $50,000. The income range for 40th to 60th percentiles is roughly $41,000 to $62,000. That is pretty substantial, if we’re comparing 10 year ROIs, and that covers only 20% of all working people.
So even if we are using the median income, the range within which this number is relevant is pretty narrow.
I don’t know what the distribution of incomes of the alumni of each of the colleges that they use are. Aside from the ROI based in median income, the ROIs based on the income range from 10th to 90th percentiles would really be needed, or at least the 10th percentile. It is far more important for applicants to know that 90% of the graduates of this program make more than X dollars than knowing that 50% of the alumni make more than Y dollars. Furthermore, a breakdown by majors is important, as is the family income of the graduate.
Based on Chetty’s 2017 article, it would seem that, for many college, ROI for students from lower income families is higher for all colleges. That would be stronger today, since tuition is proportionally higher. This would also have to look only at salary income, or on gains made by investments that the graduates made with money that they earned (as salary of bonuses).
[Aside] that last sentence is because we’re looking at ROI alone, and kids from wealthy families will usually inherit generational wealth regardless of the college they attend[/Aside]
I wonder if kids are able to take Booth MBA courses during their UChicago undergrad. (I wonder that about a bunch of schools actually, not just UChicago – if a BBA is not offered, can Econ majors take MBA courses to round out their business education?)
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