Bryan Caplan  

Advantage, Sociology: Gender and the Return to Education

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When economists estimate the return to education, they usually limit their sample to workers - or even full-time workers.  This is a serious error.  If you were evaluating the return on business loans, you wouldn't limit your sample to firms that remained in business.  The right measure, for students and borrowers, is unconditional: If part of your sample shows zero payoff from prior investment, include their zeroes in your sample.  After this adjustment, your estimated return to education will markedly fall - especially for groups with lower employment rates.*

This arithmetic has an awkward implication.  Since males continue to have higher labor force participation than women, conventional estimates seriously overstate women's return to education.  The more traditional the society, the greater the overstatement.  This labor force participation graph ballparks the size of the effect.
labmf.jpg 
[Blue=men, Pink=women, Black=combined; source: Wikipedia]

You could object that rising female education and rising female labor force participation were connected.  Fair enough.  But education was far from the only factor.  Female college grads in 1950 were foreseeably a lot more likely to spend their lives as housewives than they would be today.  Why?  Because values and aspirations were more traditional.  As a result, the unconditional female return to education in 1950 was low.

Why do I bring this up?  Because I just read a passage where a sociologist makes this point to chide a pair of eminent economists.  From David Labaree's critique of Goldin-Katz in Someone Has to Fail:
Consider one fact about the growth of educational opportunity that is a particular point of pride for [Goldin and Katz]: unlike the European model in the late nineteenth and early twentieth centuries, the American high school system educated girls at a high rate.  In fact, girls graduated from high school at a substantially higher rate than boys through the twentieth century, and this was especially true in the early part of the century, when girls had a graduation rate that was 39 percent higher than boys.  But during the same period, most women were not entering the workforce.  In 1910 the female proportion of the U.S. labor force was 18 percent and by 1940 it had only risen to 25 percent, when female graduation rates reached 60 percent.  So a large portion of the investment in high school education was going to students who were not part of the formal economy and thus could not be considered as a contribution to gains in economic productivity.
Why is Labaree so willing to point out facts that makes the typical economist squirm?  Here's my guess: Economists live by cost-benefit analysis.  Praising investments with low returns makes our skin crawl.  Sociologists, in contrast, are pluralists.  If female education has a low return, a sociologist can still praise it with a clean conscience.  So despite economists' superior quantitative skills, it is sociologists who find it psychologically easier to do the math.

* This is not true in a simple model with zero tuition and age-invariant employment rates, but it is true in the real world.


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COMMENTS (9 to date)
Chris writes:

As you know, Bryan, labor economists often often focus on samples of men, or even prime age white men, to lessen the biases associated with modeling labor force participation. So the economists deserve a little more credit than you are granting. But this reasoning is becoming less relevant every year, as your graph shows.

Engineer Bob writes:

For the earlier years in the graph, you've neglected to mention the "Mrs. degree", and assortative mating. This was a traditional way for upper middle class people to meet and socialize. Like my parents, for example.

Easier for a Sociologist to think about than an Economist, I suppose.

joeftansey writes:

So what are the actual returns on education...?

Glen S. McGhee writes:

I am with Engineer Bob on the earlier years.

But let's go even earlier and start to look at the social institution that preceeded the high school, apprenticeship. How do economists construct the collapse of this venerable European social institution in the US?

I don't think economists would even try, although the situation with apprenticeship is roughly analogous with secondary and postsecondary education now in terms of entry into the labor force, human capital accumulation, and transitioning into adulthood.

Does the same fate that overtook apprenticeship await higher education?

http://eric.ed.gov/ERICWebPortal/detail?accno=ED433292
Here is Hansen's grand view, that brings this all together under one conceptual roof. Support for Engineer Bob shows up here as well, because the emergence of the business class (say, 1890-1920 for most of America) coincided with the surge in building high schools that taught bookkeeping, typing, penmanship, and arithmetic -- skills with genuine value in the newly growing job market. Careers and professionalism for the masses came later.

But women at this time were limited in this regard, and teaching was one of the few career ladders open to them. Access to a high school education and middle-class jobs (like secretarial work) for women also meant access to potential middle-class husbands. Even in my own family, these skills were the ticket into the middle-class, and the way to get off the farm. Dig back into your family history one-hundred years ago, and you will be amazed.

The second comment would be to remark on the differential effects of recessions on the lifetime earnings of college graduates, something else economists seem to ignore in their generalized view.

Let me just share a paper on this to whet the appetite.

The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy, by Lisa B. Kahn (Yale School of Management)
First Draft: March, 2003 / Current Draft: August 13, 2009
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=702463

Taken as a whole, the results suggest that the labor market consequences of graduating from college in a bad economy are large, negative
and persistent.

For example, Topel and Ward (1992) find that 66% of lifetime wage growth occurs in the first ten years of a career. For those whose careers did not get off the ground these past 10 years, or those grads that will be stuck un/under-employed over the next ten years, the college premium disappears. This is a massive cohort. The US Census says that the 4.7 million (aged 25 to 34) that were living at home with their parents has grown by 26% to 5.9 million since 2007. This is now a total of 14.2% of the cohort, up from 11.8% in 2007.

At the end of last October there were 1.8 million Americans unemployed, an 11% increase over 2007. 2010 grads also faced a 5% jump in student loan debt (ignoring shadow debt), about $25,250. (Stats from "When Kids Come Back Home" Jessica Silver-Greenberg, WSJ)

Lastly, I'm not sure Bryan's wikipedia chart is all that illuminating because participation in the labor market, and how the occupational structure is organized, means different things at different times. For example, anyone familiar with feminist labor history will recognize the problem in terms of "women's work" -- the graph appears to exclude a whole range of "women's work," like tending to the family garden (or family farm), caring for aging parents (again, family history is illuminating), mending and sewing clothes, raising and caring for a family before the advent of household appliances and electricity, etc.

Bryan Willman writes:

A real problem with this line of debate is that it assumes the "returns to education" are all to be seen in labor markets and wage rates - in dollars and the formal economy.

Especially for high school, the argument that the (only) purpose of education is to prepare students to earn higher wages is just wrong. Some of the functions of high school may not be all that noble (e.g. "day care" function of schools,) and some have political implications (e.g. "raising good republicans" or "raising good democrats")

But also figure out how to count a variety of other worthwhile results of education, especially for high school. (College is a more complicated issue.)

Ghost of Christmas Past writes:

Even non-wage (home production) workers' productivity may be affected by education. So like Bryan Willman wrote, I don't think any analysis which relies only on cash-wage labor force participation or earnings can be complete.

daublin writes:

To follow on Brian Williams' point, when talking about a high school level of education, many of the largest advantages aren't in the wages. At that level, we're talking about basic sense about biology, medicine, genetics, literature, composition, and numbers.

While I am very sympathetic to the view that majoring in medieval gender studies has nearly zero return, high school education is much more focused on practically useful information.

Unfortunately, it is quite hard to measure these benefits....

odev writes:

Even non-wage (home production) workers' productivity may be affected by education. So like Bryan Willman wrote, I don't think any analysis which relies only on cash-wage labor force participation or earnings can be complete.

Arthur_500 writes:
So a large portion of the investment in high school education was going to students who were not part of the formal economy and thus could not be considered as a contribution to gains in economic productivity.

How do we measure the value of what we now refere to as traditional female roles? Is a quality education improtant? I argue that it is extremely important but is has not been adequately measured.

An educated head of a household can make better decisions in purchasing and time management. Such an individual can lead children in appropriate activities as well as scholastic achievement. The input to the economy may be more long-term than immediate as there are no wages.
Compare this to similar 'stay-at-home' moms in the welfare net of our Great Society. With a lower educational background many household decisions made were less than optimal. Education was not stressed in the household resulting in lower education for the children.
Without a quality educational background the entire neighborhood continued to disintegrate. The resulting loss of productivity in these welfare neighborhoods contrasted with the continued growth and affluence of neighborhoods in which educated women ran households is vast.
In this manner I think we can show that an educated individual contributes more to economic productivity than might be measured by simply looking at income.

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