Bartender, Cashier, Cook, Janitor, Security Guard, Waiter

“Because bars, like all businesses, want intelligent, conscientious, conformist workers – and a B.A. signals these very traits.”

What would lead you to believe that the premium results from the degree (signaling), rather than the traits themselves? Sounds like it would be pretty hard to disentangle the two different effects.

To get really rigorous here, you’d have to actually measure intelligence, conscientiousness, and conformism, and then compare the outcomes of psychologically equal people with and without degrees. Or supplement your data in some other way.

I don’t doubt that signaling plays an important role in income premiums, but I do doubt that this table of statistics measures those signaling effects. It probably overstates them by a lot, because it doesn’t account for pay premiums due to the underlying psychological characteristics (the premium that would occur even without signaling).

I have a small difficulty about the table.

Should I understand that in a bar with two bartenders, one with a high-school diploma and one with a college degree, the college graduate will likely have a 62% higher income than his colleague?

What kind of bars employ college graduate and which employ high-school graduate? In other words what is the ratio high-school graduates/college graduates in a bar?

Also, colleges are not all the same. What’s the income difference for a Harvard graduate compared to a GMU graduate for example? Which are the most likely to see malemployed, like working in a bar?

I also had problems with the Table 4.6, which shows that “the labor market comfortably rewards bartenders, cashiers, cooks, janitors, security guards, and waiters for both high school diplomas and college degrees”.

First, it is a table of someone else’s data. We don’t know anything about these numbers, so we can’t make any valid inferences about what the labor market is or is not doing. (Just what is the social topology of the hiring process? Where? When? Who is getting hired, who is NOT getting hired? What are size are these businesses? Are they using HR? or just word of mouth?)

More importantly, the causal connection between degrees/diplomas and wages has to be plausible. It is not. Small businesses can hire their friends and friends of friends on the basis of weak ties (Granovetter’s work on hiring), with no connection to credentials.

How do we know they even assessed credentials? The figures seem to assume that they did, and in the same way for each job candidate. How do we know this from the Table? We don’t.

The route to untangling malemployment lies in understanding the complexities of the hiring process which leads to outcomes shown, if in fact they are meaningful.

@Bostonian:

I am not Caplan, nor am I an economist, but I am sympathetic to the signaling model of education. I believe the response to your question is that employers are looking for a particular set of skills in an employee – intelligence, conformity, etc. In an ideal world, the employer would analyze each job applicant for these skills, through intensive testing, lengthy interviews, etc. But in the real world, employers cannot administer this battery of tests, so they rely in part on proxies for those traits. And having a BA is a proxy for having those traits, because it takes those traits to get into a school and graduate from it.

The more prestigious your school, the more rigorous your degree program, the more of a proxy it is. Somebody who graduates from CalTech must surely be intelligent and hard-working. Soembody who graduates from Harvard must surely be intelligent, but may be lazy (it’s hard to get in, easy to graduate). Somebody who graduates from GMU…

Next experiment is when employers don’t know credentials of their bartenders or cashiers, which are often filled informally. I’ve run bars and restaurants and I didn’t know education of most employees. I hired on personality, competence and, unintentionally, connections via recommendations.

If the gap sustains, which I guess it would, it would be a strike against signalling but would argue for human capital formed pre-college.

It’s the credit assignment problem (for all the reinforcement learning (all two of them) nerds out there).

People study something in college and the rewards aren’t going to come until years and years in the future. So how do they decide which courses are going to provide the most future benefit? We deal with the same problem in machine learning, and it’s the problem of how to assign credit for rewards or losses to past actions, when you have a long string of past actions that contributed.

In a purely private market, there would be little money available to borrow to study subjects that didn’t provide marketable skills. So students would get an immediate signal from the market: “warning! This decision is likely to lead to low rewards!” This would come in the form of high interest rates and stringent terms. The lending market does the job of determining likely future rewards and assigning them backwards to the present.

Unfortunately, we have a student loan program where you can basically get money to study whatever you want. So the student has no direct financial incentive to study the hard (but rewarding) subjects. Indeed, the student may be incentivized to take Mickey Mouse courses and get straight A’s because the “credentials” are easier to get than the marketable skills. The future is discounted. In the present you can choose the easy class that you can get an A in, or you can choose the hard class and maybe get a B or a C.
The student loan system creates this problem that students aren’t getting effective signals about what are the bad long-term decisions.

These anecdotes from “College-educated workers are taking jobs that don’t require degrees” are informative:

With the generous tips of New Yorkers and his pick of shifts, he pulls in around $80,000 a year as a bartender. It’s more than he was offered for various office jobs he considered when he arrived in the city, even though he’s highly educated.

“I have a master’s in economics and I’m bartending in New York,” he said with a shrug. “It’s a good way to make money.”

…

Saim Montakim has a bachelor’s degree in accounting but drives a New York City taxicab. It’s strenuous work, but he can make $200 on a good day. On a bad day, he barely can pay the rent for the taxi and the cost of gas.

He’s getting a master’s degree in human resource management and hoping that his dual degrees will help him find a better job. The accounting jobs he was offered upon graduation were all entry-level, paying $10 an hour. He prefers driving a taxi to being stuck in an office from 9 to 5 at that wage, he says.

…

Mariah Arcuri paid off all her debts before starting her job in a lab, which required a college degree.

She worked as a bartender in New York, earning about $90,000 a year. She paid for her college education, her graduate school and her wedding with savings from tending bar.

But because she wanted to spend time with her husband, Arcuri eventually stopped bartending and got back her nights and weekends. She now works in a lab and makes only about two-thirds of what she did as a bartender, despite her master’s degree in biochemistry.

You seem to say that college does not teach people how to do a job. this is consistent with the elitism of academia in which they claim that college is where you learn how to think.

Excuse me while I roll on the floor laughing.

But we have teachers who go through a regimentation in order to become a teacher. We have accountants that must have five years of college to become an accountant.

We had the requirement for a Masters’ Degree in order to become a Licensed Practical Nurse (doctor-lite) but now we require a doctorate! What is necessary to achieve a doctorate in Nursing sufficient to become an LPN? Statistics and management classes. Hmm, how does that make you a better nurse?

It appears that in the quest for respectability we require college education for a specific trade. However, we do not require the college to actually teach anything useful to support that respectability.

I would say we have malemployment with those who have failed to learn to think and failed to take the ethereal studies of college and relate them to the real world. Is this a problem of the student, the school or both?

“In an ideal world, the employer would analyze each job applicant for these skills, through intensive testing, lengthy interviews, etc.”

In America, since the 70s, it has been illegal for employers to give any test where 1) the test has a racially “disparate impact” e.g. whites on average score higher than blacks, and 2) the employer has not proved that the test is a pretty much perfect predictor of job performance. In practice, that burden of proof is just about impossible to meet, and since most any test will have some racially disparate impact, employers don’t try to develop any.

One reason college diplomas are such a sought after signalling device is that many other ways of signalling are illegal.

Seems to me that job premium chart needs to be sorted for age, years of service, # of years since first job, etc. Probably sex and race as well.

It does appear there is a signal using high school graduate for fiscal reliability given the high premiums over non-grads for those jobs that either handle money or involve trust. Or to put it more bluntly, criminal history.

It would also be of interest to know if those with college listed such on their application or were able to hide it by having a job history during college. I know many who’ve been told their college knocked them out of selection because the employer didn’t think they’d stick around.

Brian, have you thought of any other potential explanations besides these two famous ones? Maybe you’ve already written a post on it.