by disambiguation | 2025-04-17 03:00:31+00:00
The real story is 3 links deep, in the PDF of the original analysis and methodology from 2014 - the same is applied to the 2023 data, so it's still relevant source material for understanding their numbers.

https://www.newyorkfed.org/medialibrary/media/research/curre...

So, as a layman who does not work for the NY fed, I thought it was a good analysis ;) that is, right up until the final number crunching where there appears to be some mathematical sleight of hand.

Essentially, their ROI is a comparison of wages with and without a degree, but the opportunity cost only counts earned wages and conspicuously omits investing those wages as part of the calculation. The sleight of hand is they make a point to compare ROI of education to the stock market _after the fact_ rather than baking it into the initial formula. Equally problematic is the complete omission of student loans which has the same effect.

To be charitable, hand-waving rates makes sense in the world of ROI - 12% with a late start will eventually overtake 7% with a head start, and is therefore numerically superior. But the paper repeatedly emphasizes its own caveat, that their analysis is "all based on historical trends, which are no guarantee of future patterns." It's precisely because of current trends - the rising student debt, soaring tuition, and the growing chasm between graduation and securing your first job - that this "late start" really needs further attention.

Where is it headed, and what's the tipping point? Maybe it's still valuable if you're graduating today, but what about 4 years from now?

Back to the methodology - the scenario explores averages, but should be one of ideal financial decision making, so someone with only a high school degree has an automatic 4 year head start earning AND investing money, but those that pursue a degree are set back by debt AND negative interest rates. The question is: how big is the gap and how long does it take to catch up? This is a function of tuition, interest, wages, job opportunities, and cost of living. Again, there's no arguing with ROI, but the living reality that this data reflects is a delayed start in life at best, and a marginally positive ROI on education at worst.

The paper mentions another significant caveat challenging its own fundamental assumption: education is an investment and not a filter. I'm not aware of any analysis comparing outcomes based on socioeconomic background, but we can assume the high academic achievers would still do well financially if they didn't go to college. But there a very real and growing cohort of individuals experiencing negative ROI, where debt exceed earnings. The best data I could find on this is from 2016, we're overdue for an update.

https://www.brookings.edu/articles/the-relationship-between-...

Yet there are further confounding factors - not at all mentioned is how the modern job market is dependent on educational attainment. Employers have entirely deferred training to colleges, and the vast majority of high earning jobs today (even beyond white collar roles - ex. running a daycare) have a hard requirement of higher education. With the exception of the recent, short-lived, learn2code/bootcamp trend, there is very little latitude for non-degree holders.

In summary, there's a worrying shift in the function of modern education. It all started as a common, shared dream to give young people a better chance in life. Gradually it became an economic investment to secure better employment, then it turned into training for jobs that no longer provide such resources. Today its used to filter out those found unqualified, and at worst is a form of gatekeeping, excluding those considered unworthy. Education has become a monolith and a monopoly that controls the "all day access pass" to the labor market. ROI is a diversion, the fact is its the only game in town. "Go to college and do well, or perish."

I would like to see the fine folks at the NY Fed follow up and try to compute these extra scenarios. Don't average the outcome like you're making a sales pitch. Give us a multi-dimensional breakdown like an economist - or else us unwashed, unqualified, uneducated folks will start doing our own sloppy math and running amok, giving people wrong ideas and ultimately mislead them into bad financial decisions, that other predatory institutions run by educated folks can profit off of. (What's the ROI on that outcome?)