Few people would debate the value of a college education, given that income typically rises with education level. But it turns out that there’s another reason to get that degree: college graduates are also more likely to be compensated based on their abilities than are high school graduates.

According to a new report from the National Bureau of Economic Research (Working Paper 13951), “from the very beginning of the career, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially completely unrelated to their own ability.” This fact has particularly important implications for blacks, who “face a wage penalty in the high school but not the college labor market.”

Impact on Wages
For their report, Beyond Signaling and Human Capital: Education and the Revelation Of Ability, Duke University economists Peter Arcidiacono, Patrick Bayer, and Aurel Hizmo studied the first 10 to 12 years of work for white and black men who were high school or college graduates. They found “no racial differences in wages or returns to ability in the college labor market, but a 6-10 percent wage penalty for blacks (conditional on ability) in the high school market.”

The authors explain that attending college “allows individuals to directly reveal key aspects of their own ability to the labor market.” In other words, because employers have access to information such as an applicant’s grade point average and major “and, perhaps even more importantly, the college graduated from,” and because this information is a reflection of the applicant’s ability, they can set wages based on ability.

However, lacking such information for high school graduates, employers are more likely to “use race to statistically discriminate when setting wages in the high school market.” Therefore, black high school graduates have a particularly strong incentive to continue on to college.

Diversity at Walden
In its 2007 Top Graduate Degree Producers analysis, Diverse: Issues in Higher Education magazine ranked Walden a top producer of master’s and doctorate minority graduates in the following disciplines:

Master’s
Education – Total Minority (No. 5)
Education – African American (No. 6)

Doctorate
Business – African American (No. 2)
Psychology – African American (No. 3)
Business – Total Minority (No. 5)

Bachelor’s Degrees at Walden

• B.S. in Business Administration
• B.S. in Child Development
• B.S. in Computer Information Systems
• B.S. in Psychology

Refer Someone to Walden

• www.WaldenU.edu/refer

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