Wednesday, March 15, 2006

ROI human capital 

This is worth thinking about.
Suppose you are an employer and are filling jobs for which no credential is required. In other words, for typical white-collar jobs--product design and engineering, sales, marketing, non-CPA accounting work and so forth. Would you pay a steep salary premium for a four-year degree holder versus a high school grad? You might. Perhaps you�d think the four-year degree speaks to the job applicant�s intelligence, along with a certain facility to set goals and finish them.

But what if you could guarantee those qualities in other ways (military service, missionary work, etc.)? See, I think the Harvard or Yale degree is worth plenty, not because of what Harvard or Yale teaches--the postmodern university can do more harm than good; witness Yale�s admission of a former Taliban spokesman. The degree simply puts an official stamp on the fact that the student was intelligent, hardworking and competitive enough to get into Harvard or Yale in the first place. May I present to the jury Bill Gates? He was smart enough to get into Harvard. Then he proved his financial intelligence by dropping out to start a company.

Okay, enough Harvard/Yale whipping. Like oceanfront property, their degrees will always command a premium and will probably pay out a terrific ROI. The same is true of degrees from 10 to 20 other private colleges. But beyond those 10 to 20 schools, I suspect the price of a four-year, private college degree--$100,000 to $175,000--will be money poorly invested.
Where does one go, then, to find a good return? Online universities? Public universities? What is it that these two institutions could provide that would give a young person a positive return on their human capital investment, if not a marker that they were "intelligent, hardworking and competitive enough to get into XYZ State in the first place"? Wish I knew; I'd sleep better if I did.

(h/t: Division of Labour.)