Friday, August 27, 2010

Lies, Damn Lies, and Statistics

. Friday, August 27, 2010

I enjoy the repartee I have with IPEZone's Emmanuel. We often disagree, but the back-and-forth is always fun. I must protest, however, to his recent challenge. In an update at the bottom of this post, Emmanuel criticizes me for not being able to use data:

Now Kindred's a good kid, but he is wet behind the ears as he tends to put words in my mouth and gets embarrassed for it. Anyway, I decided to look up the numbers for myself instead of relying on other's charts. Below are the figures for US income for those 25 and up for the years 2000 to 2008 from US Census Bureau tables P-16 and P-18. It doesn't matter whether it's the mean or the median or if you're male or female; real annual income has been falling there since 2000. It doesn't matter either if you're a college graduate or have a higher educational attainment.

I guess the furriner is more familiar with US stats than the American. Also at grad school, you are taught not to compare apples and oranges, but he does so by quoting another data series and naively suggesting differences have something to do with using "mean" and not "median" data.

There's a lot of wrong in just a few sentences there. First things first, I haven't put any words in Emmanuel's mouth; I've quoted him directly. The purpose of his post is to counter the argument that a college education is a wise investment. That's why it is titled "The Knowledge Worker Myth vs Blue Collar Reality", not "A Handful of Skilled Blue Collar Jobs Are Hot Right Now, But College Still a Good Investment Overall". That's why he writes sentences like "So much for the college myth." He is claiming at least one of two things: the college wage premium is collapsing, or the real return to a college education is falling. I am claiming the opposite.

So which of us is right? I am, of course. The data I previously reported shows this quite clearly in a few easy-to-read graphs from BLS data. Emmanuel appears to prefer Census data, but as we will see that doesn't matter. Other than the mean/median distinction, the two sources appear to disagree because the time period Emmanuel selects is misleading. His starting date is the peak of the previous business cycle (2000), while his end date is the trough of the most recent one (2008). Tables P-16 and P-18 go back to 1991, so this must have been a deliberate choice on Emmanuel's part. The series I posted go back at least to 1991 as well. The longer series show an inflation-adjusted increase over the past two decades in the return to college education for both men and women, mean and median. Over the same period, inflation-adjusted median income of high school graduates declined by nearly 10%. (The same figure increased for women... from $16k to $18k.) Male and female college graduates made nearly double what those with only a high school education made across the time series. If you compare peak-to-peak, incomes for college graduates went up from 1999-2007 as well. The spread between the college-educated and those who are not also increased across the series, and those without degrees have seen especially nasty upticks in unemployment in the last two years or so.

I'd produce a nifty graph here but the Census data is a mess, it's late, and I'm tired. Please read the tables for yourself. A quick glance is good enough. Or look at the BLS data, which tells the same story. I'm not the one talking about apples and oranges. Whether you're looking at absolute or relative gains, means or medians, male or female, the pattern is clear: the more educated earn much more than the less educated, that disparity has increased over time, and job security (as well as non-wage benefits and compensation) is also much higher for the well educated. The "Knowledge Worker" is anything but a myth, which is probably why Emmanuel's pet countries like Singapore have emphasized higher educated so much.

The only way Emmanuel can reach any other conclusion is by tweaking starting dates in a pretty egregious way, and changing his argument midstream. As I say: lies, damn lies, and statistics. Whether it's intentional or not is not clear to me, but just as in a previous tangle (see comments), Emmanuel loves to make broad claims and then say "That's not what I meant" when questioned. As before, he meant what he insinuated, and what he insinuated was wrong.


Lies, Damn Lies, and Statistics




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