by Elliott Morss, Morss Global Finance
For many parents, getting their children into the “best” college is extremely important. And in recognition of this concern, a large number of college rankings have appeared. Probably the best known comes from US News. But there are many others: Forbes, Niche, and the Brookings Institute. And there is a new one from The Economist.
But is getting your child into the “best” possible college really best for them? After all, not all children are like those in Lake Wobegon where all children are “above average.”
The Rankings – Who to Believe?
Rankings of the top 25 from US News, Niche, Forbes and the Economist are presented in Table 1. I have marked those that appear in all rankings in red, those in three in green and those in two in blue. Most notable among the sets is the similarity between the first three. It suggests that the methodology used by The Economist is quite different than the others.
So What Makes the Economist’s Rankings Different?
The Economist’s approach starts by eliminating factors from the rankings that colleges should not get credit for. For example, students with higher SAT scores are probably smarter than most and because of this will end up earning more wherever they go to college. The Economist’s approach nets out the effect of SAT scores so colleges do not get credit for their effect on students’ future earnings.
The Economist’s methodology, complemented by data from the US Department of Education, also uses the following factors to predict what post-school earnings should be:
- Male-female ratio;
- College size;
- Public or private;
- Mix of subjects students chose to study;
- Catholic or Protestant religious affiliation;
- Wealth of state;
- Prevailing wages in region;
- Whether it has a ranked undergraduate business school;
- Percentage of its students who receive federal Pell grants given to working-class students (a measure of family income);
- Whether it is a liberal-arts college and
- Degree of “political leftism” in student body.
There were 1,275 four-year, non-vocational colleges with data available on all these factors in the US Department of Education database. The Economist reports that all of these variables were statistically significant at the 1% level in the earnings predictor equation it generated and that the equation explained 85% of the variation in graduate earnings.
Table 2 indicates how colleges/universities highly ranked by US News, Niche, and Forbes did in The Economist’s study. The averages behave as one would expect, e.g., the average rank of the schools scoring in the top 25 in all 4 studies (red) was higher than the average of the top schools in 3 studies (green), etc. But there were very notable differences: Yale students were expected to earn $75,592 but they end up earning only $66,000. Among the schools given the highest ratings by 3 raters, the actual earnings of Brown and the University of Chicago students were also quite disappointing.
For colleges ranked in the top 25 in two studies, Rice, Caltech, and Washington University – St. Louis also disappointed in The Economist study.
It is worth looking a bit more closely at schools ranked highest by The Economist (Table 3). While Washington and Lee, Villanova, and Harvard are primarily liberal arts colleges at the undergraduate level, the other schools on this list have a more applied orientation.
The Economist’s ranking system is far from perfect. Among other things, it only tracks earnings for 10 years and therefore favors schools with students going into professions where earnings go up quickly, like becoming a pharmacist. At the other extreme, college that turn train doctors will not fare well because of further education and residency requirements limiting earnings in the first ten years.
And of course, by not giving any credit to schools for the high SAT scores and other factors, the bar is set extremely high: if you attend M.I.T., your average earnings are expected to be $83,414 whereas if you attend Hebrew Theological College (HTC) in Illinois, you are only expected to earn $16,881. HTC should certainly get credit for its students earnings beating its estimate by $716 (4%) but not as much as Harvard should get for beating its predicted earnings by $12,731 (17%).
The “Best College Rankings” – An Alternative
Let us return to the fact that not all children are “above average.” That means not all children have either the capacity to or interest to attend the best colleges, however measured. It is understandably very difficult for many parents to accept this. But in many cases, it will be far better for their children if they do. So what then? Another approach is in order. Every few years, the US Bureau of Labor Statistics (BLS) makes a prediction for jobs and earnings over the next decade. The most recent one was done for the 2012 – 2022 period. It made estimates for 818 jobs, earnings, and estimates of job growth/decline over that period. Table 4 provides a sample from that survey.
In many cases, it will be extremely useful for parents to work through these predictions with their children. In looking at these numbers, one thing becomes immediately apparent. Nobody should want jobs at the bottom of this table. In almost all cases, they are low paying, dead end jobs. “Ground maintenance” is a euphemism for workers who mow lawns and plow snow. These workers are needed but….
Table 4. – Jobs, Earnings, and Required Training, 2012 – 2022
Source: US Bureau of Labor Statistics
On the other hand, there are jobs that require a small amount of technical training and certification that provide far more than a living wage: carpenters, high school teachers, plumbers and electricians are good examples. In this table, the projected changes in jobs between 2012 and 2022 are important – wages are likely to go up more if the projected wage growth for jobs is high. Working through these projections with children might be the best way to get them on track to do something that really excites them. And getting your children motivated and excited about a profession is important.
For some children, going to the best college will be the stepping stone to a most rewarding future. And in looking for “best” candidates, The Economist’s rankings are worth reviewing.
Certainly, having a four-year college experience can be highly rewarding. But for some, focusing on going to a highly-rated college might be a mistake. There are many rewarding jobs with limited training requirements that don’t include graduating from one of the “best” schools.