How much is a degree from a prestigious university worth? The answer is a bit difficult to answer because there are many cofounding factors: people from the connected class (folks that ‘know people’) tend to attend the most prestigious universities, and they also tend to do well professionally. It is likely that highly connected people do well no matter what.
Sorting it out is difficult, but we should remember that the objective of an employer is often to hire the most qualified person. The credentials are only an approximation. In jobs where it is easy to identify the highly productive individuals, you would expect that credentials would have less value.
In After credentials (2008), Paul Graham wrote:
Credentials are a step beyond bribery and influence. But they’re not the final step. There’s an even better way to block the transmission of power between generations: to encourage the trend toward an economy made of more, smaller units. Then you can measure what credentials merely predict.
The era of credentials began to end when the power of large organizations peaked in the late twentieth century. Now we seem to be entering a new era based on measurement. The reason the new model has advanced so rapidly is that it works so much better. It shows no sign of slowing.
In the last two years, nearly a third of IBM’s new hires there and in a few other locations have not had four-year college degrees. IBM has jointly developed curriculums with the local community college, as well as one-year and two-year courses aligned with the company’s hiring needs.
My oldest son will be attending college next fall, studying in computer science. We reviewed job ads together. It was interesting that few job ads in technology made much of a case for education. Unsurprisingly, the more senior the position, the less likely the job was to require specific education.
In the United Kingdom, the most prestigious universities are part of the Russell Group. Klein (2021) finds that graduating from these universities is not especially advantageous for most students, except maybe for those from low backgrounds:
The findings show no discernible differences in occupational prestige between graduates from Russell Group universities and other universities once conditioning on covariates. When considering career trajectories, graduates from Russell Group universities had no advantages at immediate labor market entry but gained somewhat higher occupational prestige levels than students from other universities in the first two years since their first significant job. This advantage remained stable until their sixth year in the labor market. After six years in the labor market, however, graduates from other universities had a steeper career progression and caught up with their peers from Russell Group universities.
Looking a Germany, Lang and Schwabe (2021) find that attending ‘excellent’ universities is not as helpful as one might think:
Applying a difference-in-differences approach in combination with a simulation study, we do not identify a statistically significant excellence premium in the wages for graduates of ‘universities of excellence’.
Thus there is evidence that Graham was correct in 2008: we are moving beyond credentials. In effect, you probably need to worry less today about which college you tend, or even whether you should attend college. Keep in mind that after you have had a few real jobs, few people will care about your degrees. After all, 8% of CEOs have never even completed college.