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This just in: employers care about where you went to college.
That may not seem like news. But while that might make you think of employers picking Ivy League grads over people with community college diplomas, a new study analyzes a different angle: how degrees from online for-profit colleges affect your chances in the job market. The answer: adversely.
In a new National Bureau of Economic Research working paper, economists from Harvard, Berkeley, and the NBER find that an online, for-profit diploma gives young job applicants a significant disadvantage in getting a callback from an employer.
What the researchers did
The economists sent out nearly 9,600 fake resumes to job postings found on a major job website. The jobs were either in business or health care and all had work experience requirements of four years or less, to make sure that college was of bigger importance to employers (consider whether an employer really cares where you went to college once you've proven yourself over 20 years of work). In addition, some of the jobs required a BA, while others did not.
The resumes were based on real resumes and designed to depict young workers — people with four or six years of work experience after high school, including both high school-only and college graduates. Among the resumes attributed to recent college grads, they listed either public universities of varying degrees of selectivity or well-known for-profit institutions. In addition, those for-profit degrees were sometimes obtained online.
What they found
Graduates of for-profit, online institutions with business degrees were 22 percent less likely than four-year public university grads with similar degrees to get called back to the business jobs that required a bachelor's degree.
As anyone who has ever applied for a job fresh out of college knows, it can be tough: only 8.2 percent of all resumes sent out got a callback. But those callbacks varied widely when it came to the business applicants — the mean callback rate for the public graduates was 9.1 percent, but it was two percentage points lower for the online, for-profit graduates. Graduates of local for-profit schools also had a lower callback rate, but it was not statistically significant. (Interestingly, there was no statistical difference between the "selective" and 'not selective" public universities.)
Meanwhile, among healthcare jobs, the differences were less conclusive and not statistically significant, in part because of the small number of healthcare vacancies.
What it means
The study suggests that employers perceive a difference in quality between public school graduates and online for-profit graduates.
That's a big deal because for-profit universities tend to be much more expensive than public schools. According to one 2012 paper cited in this study, the cost of education at a for-profit school is 60 percent higher than at a public school. And the number of for-profit degrees is skyrocketing. As of 2012, more than 75,000 were given out, accounting for 5 percent of all bachelor's degrees, compared to just 4,000 in 2002, according to figures cited in the study.
So this may suggest that a fast-growing population of college graduates is getting a lower return on their college investments than they could. That could have lifetime implications, as these for-profit grads not only struggle with huge loans but get off to a slow start in the job market. An early spate of unemployment could mean lower earnings later in life.
What it doesn't mean
The researchers themselves acknowledge a few limitations of their study. One is that the study only tells you something about employers' perceptions; it says nothing about the actual quality of the applicants.
"We emphasize that we measure employers’ perceptions of applicant quality, not the actual differences in human capital acquisition across sectors," they write.
In addition, the research only tells you so much about outcomes. It measures only the first step in the job hunt process, but doesn't capture job offers or wage negotiations. So it's possible that for-profit graduates in fact do even worse in the job market than this study suggests, getting fewer offers and lower pay than their peers, but it's also possible that they do totally fine in those areas of job-searching. Either way, the picture of how the job market differs for for-profit grads versus public-school graduates is incomplete.
