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NEW Lifetime Graduate Pay as an Indicator of University Quality READ HERE

UCLA ranks 77th in the nation based on this criteria while UC Berkeley ranks #20 based on mid-career salary data posted here.  Our other rival USC is ranked #54 and Stanford is ranked #8.  Now, there are at least three explanations for these facts.  The first explanation would focus on self selection bias related to who actually fills out these self reported earnings forms.   There is no government agency (with the exception of the IRS) that collects these data and the IRS does not know what college each person goes to.  The second explanation would posit that UCLA attracts students who disproportionately work for the public sector as teachers and in other non-profit jobs.  Labor economists have long talked about compensating differentials so that some jobs feature low pay but high quality of life and public service may fall into this category.  The Chancellor of UCLA has been an active champion of public service.    A third explanation is that these other schools are doing a better job than we are in preparing students for the workplace.   Which theory is correct?   The answer is crucial for determining  how much responsibility should the UCLA faculty and administration bear for this "fact".

Are future expected earnings an important criteria for ranking universities?  I would say "yes".   When my son goes to University in 6 years,  I hope he will attend a school that builds his character, introduces him to interesting people, and helps build his human capital by making him a better problem solver and a more creative thinker.  Of course, many young people place great weight on the amenities of a school such as its climate, dorms, lifestyle, party reputation and sports teams' prowess but at the end of the day, Universities represent investment not consumption activity.  How do we know which universities offer a "high rate of return"?   For better or worse (especially benchmarked to peer institutions), salary information contains quite valuable information.    Joe Tracy and Joel Waldfogel explained all of this a long time ago when they ranked MBA programs in this NBER paper using wage growth for new MBAs.  

Here is their abstract:

"We present a new methodology for ranking business schools. Unlike previous rankings based on subjective survey responses (from CEOs, business school deans, recruiters, or graduates), our approach uses data derived from the labor market for new MBAs. We adjust programs' salaries for the quality of entering students in an attempt to distinguish value added from the quality of incoming students. We then rank programs according to value added. Our results are rather surprising. While four of our top five programs are also labelled as top programs in other rankings, ten of our top twenty are previously unranked. By emphasizing program value added, our procedure identifies several programs that have been overlooked by other rankings since they do not recruit the very top students. We explore the determinants of our value added and student quality measures and find that connections to the business community are positively related to value added, while academic research and high faculty salaries are more strongly associated with student quality. We also find that tuition is better explained by our measure of value added than raw salary, suggesting that programs charge according to value added."

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