Public Colleges Shine, For-Profits Weak in Labor Market Test

(Photo: Aliis Sinisalu, Creative Commons)

(Photo: Aliis Sinisalu, Creative Commons)

A recent research study partly supported by the US Department of Education and conducted by a group of prominent researchers of Harvard University, University of California, Berkely and the National Bureau of Economic Research, examined the value of different postsecondary education credentials in the U.S. labor market, and the results bode poorly for for-profit education chains and well for public institutions.

The researchers used a resume audit study design to assess employers’ opinion towards postsecondary degrees from different types of institutions. For the study, the researchers used a vast online bank of actual resumes of job applicants to create fictitious, yet realistic, resumes that randomly varied the fictitious job seeker’s characteristics, including postsecondary institutions. Using these resumes, the researchers applied to jobs in five major US cities published on a reputable job search website.

The goal of the study was to identify whether the employers were more likely to contact an applicant whose academic credentials were from a specific type of institution. The report examined the differences in callback rates by the presence of a degree and by the type of postgraduate alma mater. The focus was on three vital comparisons: for-profit institutions versus public universities; for-profits that offer a wide range of online courses versus traditional for-profits with an established local presence; and more-selective versus less-selective public schools.

The fictitious job seekers applied for vacancies in the business and health fields. Their fictitious resumes include diverse postgraduate credentials ranging from short, industry-specific certificates to BAs, and our fictitious job applicants have just completed their final college year. The selected job openings required only minimal previous experience to highlight the salience of the postsecondary qualification to prospective employers.

The employers had to evaluate otherwise-identical job applicants who obtained degrees and diplomas from diverse types of  postsecondary institutions. By this, the researchers were able to
identify causal effects of different postgraduate qualifications on employer callback rates. More specifically, they estimated the causal effects of degrees and certificates from for-profit institutions, including the increasing number of online for-profit sector, which have not been a frequent subject of studies so far.

The research study came up with two main findings.

Firstly, for business-related jobs requiring a 4-year degree, employers tended to prefer applicants with degrees from public institutions as opposed to applicants with diplomas from for-profits. The average callback rates differed by more than 20 percent. In addition, the penalty for completing a bachelor’s degree from a for-profit institution varied across types of college.  Job seekers who graduated from local traditional for-profits were not as seriously penalized as were job applicants with certificates from large, online chain institutions that have grown significantly during the last decade.

These online for-profit schools have led 21 percent of the growth in all bachelor’s degrees and 33 percent of the increase in bachelor’s degrees in business-related fields from 2002 to 2012.
On the contrary, the share of postgraduate enrollment in local, independent for-profits has remained relatively unchanged since 2000. The worst callback rates were related to candidates with bachelor’s degrees from the fastest-growing set of institutions.

The second major finding of the study was that employers offering health jobs with no certificate or license requirements (mainly medical assistant jobs) tended to prefer applicants with certificates from public institutions compared to the job seekers with a for-profit certificate or no credential at all.  Although a majority of these jobs were entry-level and low paid, they were an excellent entry point for individuals who hoped to acquire additional qualifications while working for a large healthcare provider.

Further, the research team found no differences in callbacks for health jobs requiring a certificate and a valid license. A possible explanation for that was that passing the licensure exam meant more to potential employers than the applicant’s postgraduate credentials.

According to the study, in the absence of objective measures, the employers view a certificate from a for-profit college as a negative sign of applicant quality.

The research results can be potentially useful to the prospective students who must make a cost-benefit analysis about where to enroll in college and whether to enroll at all. The findings suggest that a for-profit degree is a poor investment relative to attending a public institution. The tuition fees at a for-profit college were significantly higher that at a public university, and for-profit degrees tended to be less valued by employers the for-profit degree seemed to be the less attractive investment.

However, an advantage of for-profits was that public colleges were often overcrowded and that for-profits were able to offer a diverse number of academic courses not well-served by public universities.