Get a good education and you will do well in life. It is possibly the most repeated piece of advice there is, handed down by parents and governments alike, and the broad data does back it up. What the data does not settle, and what economists have argued about for fifty years, is why it works.
That question turns out to matter more than the slogan, because the two leading answers point in very different directions.
I am a writer with an interest in this material, not an economist, so take this as a careful reading of a long argument rather than a verdict on it.
The premium is real
Start with the fact that is not in dispute. People with more education earn substantially more. Research on lifetime earnings has put the gap between a bachelor’s degree and a high school diploma at roughly 900,000 dollars for men and 630,000 dollars for women in median lifetime earnings, and college-educated workers tend to earn on the order of 75 per cent more than those without a degree.
That is a large and durable association. It is worth adding one recent wrinkle: the premium has stopped growing. As the Federal Reserve Bank of Minneapolis noted, the wage gap between graduates and non-graduates, which climbed for decades, has flattened in recent years. The degree still pays, but the story is not simply that its value rises forever.
An association, though, is not a mechanism. That graduates earn more does not tell us whether the education made them more valuable, or whether the people who were going to earn more anyway are the ones who get educated.
Two explanations that will not stop fighting
The first explanation is human capital, associated with the economist Gary Becker. On this view, education works because it teaches things. School builds knowledge and skills that make a person genuinely more productive, and employers pay for that added productivity.
The second is signalling, set out by Michael Spence in the 1970s. On this view, much of what a degree does is certify qualities the person already had. Finishing a demanding course signals intelligence, persistence and a willingness to jump through hoops, and employers pay for the signal even if the specific content is never used again. The economist Bryan Caplan has argued, controversially, that a large share of the return to education is exactly this kind of signalling rather than skill-building.
The difference is not academic. If it is mostly human capital, education is making people more capable. If it is mostly signalling, a good deal of the money and years we pour into it is spent proving things about ourselves rather than becoming more able. The truth is almost certainly a mix, and the argument is about the proportions.
The experiment that elite colleges accidentally ran
One study cut closer to this than most. The economists Stacy Dale and Alan Krueger looked at students who had been accepted to highly selective colleges, and compared those who attended with those who chose a less selective school instead.
If the elite institution itself conferred the advantage, the ones who went should have earned much more. Instead, they earned about the same. What predicted high earnings was not where a student went but where they had been good enough to get in. The ability and ambition that won the acceptance letter mattered more than the campus they walked onto.
There was one striking exception. Students from genuinely disadvantaged backgrounds did benefit from attending the more elite college, which suggests the institution matters most for those who arrive with the least. For everyone else, the finding leans towards selection: the schools were sorting talent as much as creating it.
The dropout myth
Against all this sits a favourite story, especially in the world I usually write about: the billionaire who dropped out. Gates, Zuckerberg, Jobs, offered as proof that education is optional for the driven.
It is survivorship bias in its purest form. For every dropout founder there are enormous numbers of dropouts who did not become billionaires, and they do not get profiled. It is also worth noticing that the famous ones tended to leave places like Harvard and Stanford, walking away from elite institutions with rare ability, wealthy networks and safety nets already in hand. On average, and it is not close, not finishing predicts worse outcomes, not better ones. You cannot reason about the base rate from the outliers who beat it.
What this does and does not mean
None of this is advice about whether any particular person should study any particular thing, and I am not going to pretend a general pattern can make that call for you.
What the evidence supports is narrower. The credential pays on average, the reason is a genuine mix of real skill and mere signal that nobody has fully untangled, and the clearest case where the institution itself changes a life is for students who started with the least. It is also worth remembering that education and a degree are not the same word. Plenty of learning that leads to success happens outside a lecture hall, and much of what predicts who thrives is not captured by a certificate at all, a point I have touched on when writing about the early predictors of adult achievement.
The honest version of the old advice is less tidy than the slogan. Education is strongly associated with success, for reasons we only partly understand, and the diploma is doing at least two very different jobs at once.
