A working paper on private returns to tertiary education I co-authored has been published in the Treasury series (WP 13/10). I didn’t do all the fiddly bits, but did help with constructing the logic and the story behind what we think was going on. In a nutshell, NZ ranks poorly in the OECD research on returns to education. Around half of the difference between local returns and the OECD average can be traced to measurement issues (comparing apples with applesauce), while the other half is actually poor returns. The overwhelming reason for the poor returns is the low wage premium to being educated.
One of the issues we examined was ‘mismatch’. With the NZ data, there wasn’t much we could do. There just isn’t enough information on what happens to students after they leave tertiary education. I know that the pay-off to a liberal arts education for me was a long time coming — it isn’t enough to follow people for two years or five years. To cite our conclusion:
Finally, mismatches between employment and field of study and/or qualification level are often cited as a possible driver of low returns. There is little evidence that observed mismatches are in fact mismatches at all. However, if persistent mismatching is going on due to policy or market failures, this could be having a significant impact on returns. Whether that is the case or not is an open question.
Mismatch actually refers to two separate things. One is qualification mismatch — people getting Bachelor’s degrees when employers really want trade qualifications. The second is subject-matter mismatch — university students studying French literature when employers want computer science grads.
The Chronicle of Higher Education (CHE — did they choose that acronym on purpose?) recently published some pieces on mismatch. One looked at what employers wanted out of applicants’ educational experiences, and ended up muddling the two kinds of mismatch. However, when it did talk about subject matter as opposed to level of qualification, it cited one person as complaining:
it’s fundamental abilities that he says recent graduates lack, like how to analyze large amounts of data or construct a cogent argument. “It’s not a matter of technical skill,” he says, “but of knowing how to think.”
‘How to think’ — that’s pretty much the definition of what a liberal arts education is supposed to provide.
(Importantly, though, the survey company approached 50,000 firms and had only 704 responses, so we should be careful about reading too much into the results. But maybe I’m just analysing data to construct an argument.)
Fortunately, as the CHE also tells us, students are in fact choosing liberal arts degrees:
There’s only one problem with those insistent accounts of the decline of the humanities in undergraduate education: They are wrong. Factually, stubbornly, determinedly wrong.
I have been trying to point this out for years, using “numbers” and “arithmetic,” but it appears that the decline in humanities enrollments is universally acknowledged. Everyone simply knows that it has happened….
That piece is a welcome correction to the record. I had heard about the decline so much I believed it myself — turns out it isn’t true.