Using the 1997 National Longitudinal Survey of Youth it is possible to control for these and other differences between college grads and the rest of us. Once you control for both the risk of not graduating from college and differing personal characteristics, the earnings boost attributable to college attendance is cut in half. Looking at data that includes people from a wider age range confirms these results. Treating the entire wage gap between high school and college graduates as if it's due to going to college significantly overstates the financial benefits of attending college.
THE MAJOR QUESTION
A similar logical flaw affects widely-publicized studies on the "best" college majors, interpreted as those leading to higher pay following graduation. For instance, a report from the Center on Education and the Workforce at Georgetown University details the "economic value" of different college majors. Relying on data from the Census Bureau's American Community Survey, studies such as this purport to show that technical fields of study lead to much higher earnings after graduation, while "softer majors" pay far less. For instance, median earnings for individuals with a Bachelor's degree in engineering, mathematics or computer science top $70,000, while BA holders who majored in the arts, education or social work earn less than $47,000. Unemployment rates also differ by college major, with the Georgetown group arguing that "choice of major determines unemployment."
Once again, this study claims that education determines differences in pay and employment that may actually arise from other causes. For instance, high school graduates aiming for high-earning majors such as engineering enter college with higher average SAT scores, according to the National Center for Education Statistics, while those aiming for lower-paying majors have lower average SAT scores. But SAT scores almost certainly are correlated with higher incomes regardless of college major chosen. Similarly, high-paying jobs also entail longer work hours. Numerous studies, including by Daniel Hamermesh and Steven Gould of the University of Texas and by Joseph Altonji, Erica Blom and Costas Meghir of Yale, have found that controlling for SAT scores, hours worked and other factors explains most of the pay differences that initially appear to be driven by choice of college major.
In addition, while skill-specific technical fields may have higher average earnings they also exhibit greater variations in earnings. For instance, an engineer can earn very high wages if his skills are in demand, but changes in technologies or markets can render his skills less valuable and retraining in a different specialty can take time. On the other hand, majors imparting more general skills have both lower average earnings and less earnings risk. A history major may not earn much, but he has a wide variety of professions to choose from. In part at least, following one of the "better" college majors may not be like winning the sweepstakes so much as purchasing a stock: higher returns, but more risk.