Ian D. Clark

On average, people who attend university enjoy higher lifetime earnings than those who don’t. Men in Canada who hold a bachelor’s degree earn, on average, 45 percent more than men who have a high school diploma; for women, the figure is 60 percent (Boothby and Drewes, 2010). But what about “marginal students” – those who would not be admitted unless total enrolments were increased?

At the November 2012 Learning to Earning Conference, Phil Oreopoulos and Uros Petronijevic reviewed the latest research on returns to education, including those for marginal students.

The question of returns for marginal students is important for Ontario at this juncture because the province has to determine whether to invest in further expansion of its undergraduate education capacity. In Academic Reform (2011), David Trick, Richard Van Loon and I concluded that Ontario should expand undergraduate capacity 7 to 12 percent (over 2009 levels) by 2015 and 13 to 27 percent (50,000–104,000 spaces) by 2025 to meet projected demand. We estimated future demand for baccalaureate education by using the provincial government’s demographic projections for the relevant age cohort. We assumed that the proportion of that cohort who seeks to attend university would continue to increase at between 50 to 100 percent of the rate that it has increased in the past several decades.

Some scholars have suggested that the benefits of university for marginal students are not worth the costs incurred. For example, George Fallis of York University wrote in a March 5, 2012 article in the Toronto Star, “The participation rate cannot go much higher, given the diversity of aptitudes, interests and aspirations of the age group.” The inference is that students at the margin of being admitted in an enrolment expansion will benefit less from university than the average student admitted.

Is this inference correct?

Oreopoulos and Petronijevic (2013) outline the marginal-students-benefit-less-than-average argument:

If we believe that the college decision is made based on a cost-benefit analysis, then those students who choose to go are the ones with the largest returns, while those who opt not to go have the lowest returns. It is because they have the least to gain that the marginal students are least likely to attend. Since the [expansion] policies induced these students to attend, it is natural that we see them realizing lower returns.

A good example of this position is found in Charles Murray’s 2008 essay, Are too Many People Going to College? Murray illustrates his case with a hypothetical marginal candidate in the United States: a young man who is assumed to be at the 70th percentile in linguistic ability and logical mathematical ability, and at the average in interpersonal skills, who plans to go to university and then become a white-collar manager. If this young man had the aptitude to become a manager earning the mean income for management occupations ($88,450 in 2005), university would make economic sense. But with his aptitudes, Murray argues that the young man is likely to end up earning only at the 10th percentile of management occupations ($37,800 in 2005) and the return to a university education would be much lower than for those who had average entrance qualifications. Indeed, Murray notes that if this young man happened to have the small-motor skills and spatial abilities that would help him become an electrician earning at the 90th percentile of electricians ($70,480 in 2005) then he should train to be an electrician rather than go to university. Although managers on average earn twice as much as electricians, Murray’s young man with marginal academic skills but good motor skills could expect to earn twice as much if he were to become a trade-school trained electrician than he could earn if he were to become a university-educated manager.

Murray’s contention that too many students go to university was endorsed by Pedro Carneiro, James Heckman and Edward Vytlacil in a paper in the October 2011 issue of the American Economic Review entitled Estimating Marginal Returns to Education. The paper describes a method of using “a local version of instrumental variables” to calculate marginal returns for hypothetical policy changes. The authors demonstrate that for three different hypothetical policy changes applied to data from the National Longitudinal Survey of Youth of 1979 – which tracks Americans who were of normal university age in the early 1980s –  the specific policy-relevant treatment effect of university is lower than the return to university estimated by using the techniques based on averages.

But Oreopoulos and Petronijevic note that these conclusions rely on the idea that the probability of university attendance is determined solely by economic factors. What if it is also determined by cultural and social circumstances?

Sociologists Jennie Brand and Yu Zie developed a model to evaluate this hypothesis.  They drew dramatically different conclusions in a 2010 paper in American Sociological Review, entitled Who Benefits Most from College? Evidence for Negative Selection in Heterogeneous Economic Returns to Higher Education. Brand and Zie applied their model to the same National Longitudinal Survey of Youth of 1979 as the three economists noted above and found evidence to support what they call the negative selection hypothesis: “net of observed economic and noneconomic factors influencing college attendance … individuals who are least likely to obtain a college education benefit the most from college.” Their finding holds for both men and women, for every observed stage over the life course, and for two different cohorts. Brand and Zie believe that the data support their proposition that:

The increasing demand for educated workers alongside the decreasing demand for less-educated workers has resulted in an increase in the earnings differential between educated and less-educated workers … [and] this differential is especially large among individuals with a low propensity for completing college. Therefore, a principal reason for low propensity college-educated workers’ relatively large economic return is that their social position is marked by substantial disadvantage. In the absence of a college degree, low propensity men and women have limited human, cultural, and social capital and hence particularly limited labor market prospects. By contrast, in the absence of a college degree, individuals from more advantaged social backgrounds can still rely on their superior resources and abilities. The negative selection pattern does not emerge because low propensity college goers earn more wages than do high propensity college goers; they do not. Rather, the pattern emerges because low propensity non-college goers earn so little.

Michael Hout, in his comprehensive review entitled Social and Economic Returns to College Education in the United States, published in the April 2012 issue of American Review of Sociology, sides with Brand and Zie in his conclusion about the benefits of university to marginal students:

Probably the biggest surprise in recent research concerns the interaction of ability and schooling. Evidence from both high school and college research implies that the young people who benefit most from education are not the most talented but those who have modest skills and abilities. It appears that the most talented students do well on their own and the least talented ones do not prosper anywhere. The broad middle range of roughly average talent respond to schooling the most. This is a crucial policy point. It means that throughout the history of American higher education we have seen appreciable gains by pushing the frontier of opportunity further … Continuing so that the nation can see half its young people succeed in college … will yield even greater returns because the expansion will embrace precisely the segment of the population most likely to benefit from it.

After reviewing all the leading economic and sociological literature, Oreopoulos and Petronijevic conclude that “the majority of the empirical literature actually suggests that the returns to marginal students are at least as high as the average, if not higher.”

In Ontario, this conclusion would apply to the 50,000–104,000 additional students who would be in university in 2025 if enrolments were expanded as suggested in Academic Reform but who would not be admitted if enrolments were capped at their current level as proposed by George Fallis.

It would appear that the most current research on the returns to university for the marginal student supports a continuation of the university enrolment policy adopted by Ontario governments of all political stripes since the 1960s. This policy provides a university place for all Ontarians who are qualified and sufficiently motivated to apply and pay the requisite student costs net of available financial assistance.

Given Ontario’s fiscal outlook, continuing this policy will likely require that both government and universities seek more cost-effective ways of providing quality undergraduate education – the essential challenge analyzed in Academic Reform. The research into marginal students also underlines the need to pursue three additional themes developed in various studies sponsored by the Higher Education Quality Council of Ontario and in our book: 1) better information to enable students, parents, and counsellors to understand the costs and the likely benefits of a university education; 2) more differentiation among institutions to be able to respond to the immense diversity of student attributes and ambitions; and 3) better pathways between postsecondary institutions and programs to accommodate a change in a student’s interests and aspirations.

Ian D. Clark is a Professor at the School of Public Policy and Governance, University of Toronto. www.ian-clark.ca.

 

Works Cited

(note that the links in the text point to the latest publicly available electronic version of the document).

Brand, Jennie E. and Yu Xie. (2010). “Who Benefits Most from College? Evidence for Negative Selection in Heterogeneous Economic Returns to Higher Education.” American Sociological Review, 75(2): 185-204

Boothby, Daniel, and Torben Drewes. (2010). The Payoff: Returns to University, College and Trades Education in Canada, 1980 to 2005. Toronto: C.D. Howe Institute.

Carneiro, Pedro, James J. Heckman and Edward J. Vytlacil. (2011). “Estimating Marginal Returns to Education.” American Economic Review, 101(6): 2754-81.

Clark, Ian D., David Trick and Richard Van Loon. (2011). Academic Reform: Policy Options for Improving the Quality and Cost-effectiveness of Undergraduate Education in Ontario. McGill-Queen’s University Press. Excerpts and commentary at www.academicreform.ca.

Fallis, George. (2012). “Ontario doesn’t need three new campuses.” Toronto Star, March 5. At http://www.thestar.com/opinion/editorialopinion/article/1141410–ontario-doesn-t-need-three-new-campuses (accessed 16 November 2012).

Hout, Michael. (2012). “Social and Economic Returns to College Education in the United States.” Annual Review of Sociology, 38:379-400.

Murray, Charles. (2008). “Are Too Many People Going to College?” The American, The Journal of the American Enterprise Institute, September-October. At http://www.american.com/archive/2008/september-october-magazine/are-too-many-people-going-to-college/ (accessed 16 November 2012).

Oreopoulos, Philip and Uros Petronijevic. (2013). “Making the Most Out of College,” Chapter 2 in Future of Children, edited by Lisa Barrow and Cecelia Rouse.