A recent post referenced an article in The Atlantic about the cost of not going to college. These types of statistics are often cited to support the contention that while the cost of a university degree may be significant (and increasingly significantly over time), it is still a good “investment” because the cost of not having a degree is far more significant.

What these articles fail to mention is that these studies—lifetime earnings of those with and without college degrees—almost never provide an apples-to-apples comparison and, therefore, routinely mistake correlation for causality.

To begin to assess the value of, say, a Harvard degree one cannot compare the lifetime earnings of those who attend Harvard relative to those who do not. Instead, one needs to compare the lifetime earnings of those who are admitted to Harvard and receive a degree relative to those who are admitted, attend, but subsequently choose to discontinue their studies to pursue another opportunity as Gates and Zuckerman did.

Similarly, one cannot compare those with college degrees directly to those who do not have them because those populations are different in many ways that have nothing to do with the degree.

A far better method to assess the value of a college degree is to look to the labor market and examine the income of those with a college degree relative to those who do not have one.

For example, in recent years, upwards of 45% of those who earned a college degree were not currently employed in jobs that required a college degree. To understand the earnings premium realized by that segment of the degree-holding population, one needs to examine the payrolls of companies like Kroger, the Gap, and Wal-mart to determine how much, if any, premium those companies pay to have someone with a college degree ringing up sales rather than someone who lacks a degree.

But it also important to keep in mind that even if those college-educated cashiers and shirt-folders earn a premium, that premium needs to be discounted by lost wages over four (or more) years of college and the debt incurred to earn a degree.