Debunking the Great College Earnings Myth
More epic than the myth of the Unicorn, Bigfoot, or the Loch Ness Monster, is the Myth that College Leads to Making More Money. Eventually, somehow, over time, it will. This Myth is held as Truth by Parents and Teachers, and its existence is passed on in bedtime stories and elementary school classrooms to every child in the land.
You’ve probably heard some amazing things about college, ever since you were young. College is Fantastic! College Makes You Well Rounded! College Lead to a Brighter Future! College Makes You Happy & Earns You Millions of Dollars!
Feeling doubtful about yourself and your future? Go to College, No Matter What the Cost!
College is Spoken of as Life’s Magical Farting Unicorn
Like any Mythical Creature, there is little to no evidence that Higher Earnings from Educational Achievement ever actually existed. It is the stuff of legend, but it has an ironclad grip on the imagination of the entire culture.
In Reality, all College Earning statistics are skewed, misleading, and scientifically inaccurate.
We just saw that with some of the Underemployment statistics. College grads are emerging from 16 years of compulsory education and working in the same jobs they would’ve gotten right out of high school. Being in those jobs puts them on a path to make $10K less a year.
But Statistics do not matter in the face of a Myth.
When you start to bring this up or question this, your Parents and Teachers will return to the College Earnings Myth in order to justify your investment in a degree.
“Somehow… it will lead to more money…”
And the entire Myth is based on one chart. This one:
Just like the myth of the Loch Ness Monster was propagated primarily on this photograph.
For years millions of people believed that this photograph proved the existence of the Loch Ness Monster. Until a bunch of scientists looked closer and realized it was a fake. Which is what we’re going to do with this chart.
And once you see the backwards reasoning behind this chart, you’ll never be the same.
So let’s dig into it.
Education Doesn’t Cause Earnings: Selection Bias and Misleading Data
Here’s the chart one more time.
This Data comes from the Bureau of Labor Statistics, and it’s based on the Current Population Survey. At first glance, it appears to be Conclusive and Real. It says that if you get a Bachelor’s Degree, you’ll earn $1,198 a week. If you don’t you’ll only make $553 to $862 a week. Almost any News article you read that claims College Leads to Making More Money will use this chart and this data to back it up.
There’s only one problem. The chart is a complete misinterpretation and oversimplification of the data and provides an incredibly misleading conclusion.
The title of the chart “Unemployment Rates & Earnings by Educational Attainment”.
This implies that one’s Earnings are a direct result of their Educational attainment.
That is 100% Scientifically Inaccurate.
There’s absolutely no evidence that a person’s educational achievement actually leads to higher earnings. All it shows is that people who happened to get a Bachelor’s Degree (which is at least 70% of the population, as most every high school student is pressured to get a degree) happened to go on and eventually earn more money.
For example, Mark Cuban went to Indiana University, but it’s not the degree that caused him to go on to become a billionaire.
The one thing of value you learned in science class is that to do a proper scientific or statistical study, you need two identical groups: a control group and a variable group. Let’s say you were studying the impact of a new pill to treat High Cholesterol.
You have to come up with 200 people with similar ages, lifestyles, and cholesterol problems. You split them into 2 groups. Give one group your new High Cholesterol Pill, and the other group gets a Placebo (a sugar pill). You study the results.
This is called a Randomized Double Blind Placebo Test study, and it’s an example of a Conclusive or Causal Study. By creating two similar groups and providing them with one different factor, the pill or the placebo, you can determine is the pill is causing improvements.
This Earning by Education chart is Bad Science at best, Propaganda at its worst. They have basically clumped together All Students in the Country and then drawn a conclusion. Everyone from the Math whiz with incredible drive and aptitude, to the D student stoner with no ambition who is going to end up working at WalMart.
No surprise the Math Whiz is going to choose college! And no surprise the D Student stoner is going to avoid college! In our culture, 70% of students go to college. The pressure to go is insane.
Higher Aptitude students are inclined to select college. Those without such aptitude are inclined not to select college. When these higher aptitude, more driven students happen to attend college and then, eventually go on to earn some more money, do you think it has anything to do with the fact they studied the early works of Milton in school?
This phenomenon is called “Selection Bias”. And it distorts all the data.
Selection Bias and “Seth Boost Bars”
I just created a new nutritional bar called “SethBoost”, and I want to prove that this Revolutionary Bar is responsible for enhancing Athletic performance. I want it to become a Necessity to athletes everywhere. So I conduct my own study.
The study measures Push Ups as evidence of one’s Athletic Performance. I grab a whole huge group of people to participate. But instead of doing it the right way i.e. getting 100 in shape athletic people with similar physiques and diets, I decide to just grab a bunch of totally different groups of people.
I grab a group of Australian Rugby Players, and a whole bunch of out of shape people who just bought gift certificates to the Cheesecake Factory. I fill the room with a buffet of food — pizza, hot dogs, donuts, and also my SethBoost Bars.
Naturally, all of the out of shape people go nuts on the pizza, donuts, and hot dogs. The Australian Rugby Players, not wanting to eat fatty, greasy foods, eat the SethBoost Bars.
Then I line everyone up to do their push ups and this is the result:
Whoa! Did you see the effect my SethBoost Bar had on their Performance!!!
This Bar is Amazing! Everyone should be eating them!
That is EXACTLY the same mindset used when people examine the Earnings by Educational Attainment Chart.
The point of all this is that – if you are someone with the aptitude and drive to go to college, then if you skip, you’re going to end up in a better position that those who attend. Since the degree is not causal, it has absolutely no relationship to your earnings, then skipping just means you get to start your life faster and without the debt.
THERE HAS NEVER EVER BEEN A SCIENTIFICALLY ACCURATE STUDY OF EARNINGS BY EDUCATIONAL ACHIEVEMENT
I really want to drive this point home.
A Scientifically Accurate study to determine the actual causal relationship between someone’s earnings and Educational Attainment would look like this:
Take a group of 1,000 High Achieving, Intelligent, College Ready Students.
Send 500 to College.
Have 500 Skip College.
Assess their earnings and accomplishments in 10 years.
This has never been done.
In the History of the World.
The closest thing we have are messages from people who Skipped College and didn’t end up sleeping in a dumpster, like this:
Earnings Are in Spite of College: Old People Like Me Skew the Numbers
This is me at age 17. I’m on the right, with the fro. So young, so innocent, not a care in the world (except getting into college).
Like most people my age, I endured the clustered frenzy of college admissions and SATs and eventually went to college. I graduated NYU in 1999. After that I worked as a waiter, video editor, cabana boy, pizza delivery driver, and telemarketer. I had absolutely no idea what I was doing in life or how to make money. I somehow managed to pay off my student loans, but I never made more than $30,000 or $40,000 a year ($15-$20/hr) in my 20s.
I often lamented my debt, and the fact that I hadn’t learned a damn thing in school that was relevant to real life. Especially making money.
Finally in my 30s, I discovered Digital Marketing, an in demand, high income skill set. I went from making $40K to $60K/yr within 2 years. By the third year I was working In House at a private company making $100,000 a year. I went on to freelance and start my own online training program and have been able to travel freely while earning six figures a year.
My success is based on years of struggle, mistakes, sweat, and a lot of generous teachers I found via the internet. I learned a new skill set years after college and worked hard to build something out of it and help people along the way. My esoteric college classes in Italian Cinema and Anthropology (yes, I studied the indigenous peoples of Papua New Guinea) had nothing at all to do with my eventual success.
Yet, statistically, my $100,000+ earnings will now be counted among those who happen to have a Bachelor’s Degree. The Colleges can then use my results, which happened long after graduation and had nothing to do with the degree, as completely misleading evidence that our college degrees somehow “led” to my success.
If I could go back in time, I would easily have skipped college. It was the biggest financial blunder of my young life.
By the same token, my business partner Matt Tran, who also has a degree and now makes his living on Youtube helping young people avoid college, will also be lumped into that “Degree” category. In fact there are millions of people who happened to go college, learned absolutely nothing, struggled with their debt, and eventually managed to make things work.
Colleges will continue to insist the degree somehow led to their success and take credit for it. Parents and Teachers will believe this because it fits the Myth that they have believed in their entire life. Looking closer is too painful for them.
But it’s even more painful for you if you don’t look closer.
BILLIONAIRES SKEW THE DATA EVEN MORE
Some famous people, like Bill Gates and Mark Zuckerburg, did drop out of school before graduating. Which is why they are penniless failures who fled society in disgrace. No, wait. They’re billionaires. Because Education Doesn’t Cause Earnings.
But actually, they are the outliers. 70% of Billionaires do have a College Degree, according to Billionaire Census by Wealth-X. (Although given how important people think college is, the fact that 30% of Billionaires don’t have a degree is pretty shocking).
Many colleges have used this as marketing material to promote their programs, implying that by attending their programs you too can own a gold plated speedboat. But this is, of course, absurd. And why? Let’s hear it:
Because, Educations Doesn’t Cause Earnings.
It’s the exact same thing I just described about my situation, but with numbers that throw off the entire equation. Since people like Mark Cuban and so many other Billionaires got a degree, it inflates the overall “College Degree” earnings to an absurd level. Even if they are looking at Median earnings instead of Mean (i.e. the weighted midway point between the highest and lowest earners vs. the average), it still has a massive effect on those numbers.
The $1,198 a week number includes data affected by 70% of the people who make more than $1,000,000,000 in a year. Don’t you think that boosts the number a bit? In reality the number should be much lower.
And that makes even more sense when you look at the next piece of data.
NOBODY MENTIONS STAGNANT WAGES
Harvard Business School did a study, based in the whole Earnings by Educational Attainment paradigm. Even though we’ve established that this paradigm is completely and utter nonsense, their findings were quite interesting.
Wage growth is super important. It’s a measurement of being able to advance in your field and ultimately keep building a better career, and a better life.
Back in the old days, the hourly wage growth gap between high school diploma and college degree holders was huge! .9% growth in 1970-2000 for people with a college degree versus -.2% for people with a High School diploma only.
In the 21st century, that’s all changed. People with a college degree are experiencing only .1% wage growth. That’s almost a 90% loss in wage growth! By comparison people with only a high school diploma have -.1% wage growth, which is actually up from decades ago.
Blah blah numbers blah. The point is that the gap from high school to college went from 1.1% to .2%, which is a lot. Almost completely wiped out the different in wage growth for people with a high school diploma vs. people with a degree.
What’s so crazy is that this has happened even as the pressure to go to college has exploded and college students are paying more than ever in tuition. More than 50% are landing in non college jobs. This actually reinforces what we saw earlier, that people who end up underemployed make less and less.
By the way, all of this only applies to those graduates actually lucky enough to get a job in the first place. Millions of Graduates would kill to be Underemployed, working in Customer or Food Service or at an Office, or in Sales.
According to the BLS in 2018:
72.3% Employed means 27.7% NOT Employed – nearly one third of Graduates are not employed. Them be Great Depression Level numbers of lack of Employment.
If you know anyone who graduated college recently, you know that finding that first job out of school is a major ordeal. In Reality, it’s a major challenge for someone with 16 years of esoteric Academic Knowledge and absolutely no work experience or marketable skills to get any kind of gainful employment.
Now, Unemployment numbers are a bit confusing. So let’s decode them.
We have to start with a really big annoying chart.
Okay, so what does all this mean?
Basically, if you look at “RECENT COLLEGE GRADUATES” you’ll see the Unemployment Rate is 12.3%. That’s three times the National Average (when the chart was made, long before Covid. It is likely much higher during the pandemic). And higher than for people with an Associates Degree. That’s less than 27.7% it should be based on only 72.3% of recent graduates being employed.
That’s because 16.8% of Recent Graduates aren’t in the Labor Force.
Okay, so here’s where things get kind of stupid. “Unemployment” only measures people who are actively seeking work. So if you’re just sitting on your butt, or going back to Grad School, then you aren’t even counted as part of the Labor Force.
And 20% of people who graduate keep avoiding Reality by returning to Grad School.
189,000 Divided by 1.119 Million Bachelor Degree Grads age 20 to 29 =
16.8% NOT IN THE LABOR FORCE.
Adding 16.8% + 12.3%, you get 29%, closer to the 27.7% actual percentage of grads without jobs.In Reality, it’s likely higher than that. A Properly Randomized study of recent grads by Rutgers University is a good window into this, where only 51% of grads had full time gigs.
However anytime you hear about Unemployment in the media, they are going to derive their numbers from the Mythical Data, where College Graduate Unemployment rate is around 2%. (Again outside of Covid).
And again this data, without being analyzed properly is used to give the impression that the degree leads to lower unemployment. As we already discovered, this data is not causal nor is it scientifically conclusive. Educational Attainment has nothing to do with Earnings, or even Unemployment. All the data can do is show the given situation for a certain group of people.
And those numbers include people in their 40s, 50s, and 60s who’ve been in the workforce for decades. People who happened to earn a BA happen to have a lower unemployment rate in the long term. It has nothing to do with their degree.
I’m not saying a Degree leads to Grads being Unemployed. I’m just saying that, given the propaganda and belief that a Degree leads to success, the numbers are petty grim.
Remember, the recent graduate data is for people aged 20 to 29, but BLS Data from the Mythical Chart is only for people 25 and over. That means anyone aged 20 to 24 is effectively cut out of the Mythical Data. That’s millions of people! And one reason why the overall College Unemployment rate is still relatively low.
Leaving people aged 20 to 24 out of most of this data is what allows for the overall skewing of the data. If people aged 20 to 24 were included in the data the overall Unemployment Rate for people with a Bachelor’s Degree would be Higher.
Here’s one more fun fact.
This data was just updated for 2018. Take a look at 2017 vs. 2018.
In 2017, 77.6% of people with a BA aged 20 to 29 were employed.
In 2018, 72.3% of people with a BA aged 20 to 29 were employed.
That’s a drop of 5.3%.
More people going into college, fewer people working jobs to pay off their loans.
Something to consider when you realize total debt is $1.9 Trillion and counting.
Now, let’s take a closer look at even more misleading statistics.
And sadly, this is just the beginning.
Now look, I have a couple more chapters (believe it!) going into even more detail about this gross distortion of the truth.
In the next chapter I’ll talk more about how the media and colleges work together to really mislead the public on the value of a college degree.
And then I show you how salaries are misunderstood to make an even more confusing and misleading picture.
At the end of the day, it’s college graduates and their families who end up carrying the burden of all these lies.
And that’s why I’m going into such great detail about it.
You’re welcome to continue on to the next article or you can use the table of contents/menu to skip ahead to the part where I start talking about the solutions to all this madness.