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Higher Education for All. April 15, 2014.

The Department of Education has been saying that 72 percent of private sector programs produce graduates who earn less than the median high school dropout. This statistic appeared shoddy from the beginning and now people are shining the light on its faulty reasoning.

Glenn Kessler, the Fact Checker at The Washington Post, called the U.S. Department of Education’s made up earnings statistic “bogus”, “apples to oranges”, “too fishy” and awarded it the distinction of “Two Pinocchios”.

The Department, instead of admitting the error and retracting Secretary Duncan’s misleading statement,continued to obfuscate and mislead the public on the subject.

What is interesting is that their blog post does nothing to clear-up the math on the made up 72 percent figure. Instead it further undermines key arguments the Department makes in justifying its proposed gainful employment regulation.

Point 1: The Department admits that the vast majority of PSCUs provide students with a boost to earnings.

In the blog post the Department writes, “There likely is an earnings gain in the vast majority of the programs that we evaluated. It just may be the case that a student may be making something less than a high school dropout before they enroll in a program, and three years after they graduated they are still making something less than a high school dropout.”

Economists, higher education leaders, private sector institutions and policymakers have been making this point for years. Taking the Department’s statement one step further, if the vast majority of programs give graduates an earnings gain, then shutting down the programs will deprive the vast majority of students additional income.

The Department is (intentionally or unintentionally) making the point that students attending PSCUs who had previously had low earnings, could receive big benefits from acquiring a credential. Their earnings, however, would still end up being deemed too low by the arbitrary metrics within the regulation, despite the fact that they benefited from their education.

For the good of students, we should be comparing the lifetime earnings gain that results from their education to its cost. We should not be exclusively looking at the level of graduates’ earnings like the arbitrary gainful employment metric does, because this misses the key point of measuring how much better off these students became as a result of attending a private sector program.

The Department has now made clear, in their own words, that there is an earnings gain from the “vast majority of programs.” If that lifetime earnings gain is larger than the cost, how can they continue to argue that students are worse off attending a program? They can’t, unless they want to promote the concept that dropping out of high school is better than getting postsecondary education.

Point 2: Does the Department think students who start out with poor labor market opportunities shouldn’t go to college at all?

In their blog post the Department writes students “may be making less than a high school dropout before they enroll in a program” – admitting that PSCUs serve students who would have had low earnings in the absence of postsecondary education.

By ignoring the earnings gain that results from a private sector credential, the Department is effectively saying that if a student is making less money than what they arbitrarily deem to be a good amount, regardless of how much better off that student is compared to before they began school (which is likely a lot better), then that student should never have been allowed to seek an education in the first place.

How can any college serve students who are starting at a low baseline if they will be judged based on the level of students’ earnings and not on the gain the students make relative to that baseline?

Point 3: The 52-week full-time worker

The Education Department completely misses the point in its response about what the appropriate earnings number is for high school dropouts. It may be the case that the U.S. Department of Labor calculates the earnings of full-time workers using 52 or 50.5 weeks for some purposes, but that doesn’t mean it’s appropriate for this comparison.

The Department chose to calculate earnings for private sector programs in a way that includes both full-time and part-time workers, as well as people who are unemployed and people who drop out of the labor market altogether to care for a family member, to raise a child, or because of another personal choice.

The Department then chose to compare that number to a number that excludes anyone who worked less than full time for a full year, which is a very large portion of the high school dropout labor supply. This is simply not an honest comparison.

The point is not whether they’ve correctly calculated the earnings of a full-time working high school dropout. The point is that they are comparing that number to a number that includes part time and non-working people.

The Department says, “… Regardless, we feel that 52 weeks is a fair and reasonable assumption for the work-year of workers who are high school dropouts—of those who work [emphasis added], 87% work 52 weeks a year.” The number of people who dropped out of high school that do not work at all or that work part time does not factor into the Department’s calculation of the earnings of dropouts. It does, however, factor into their calculation of those who just graduated from a private sector program.

If it is fair and reasonable that earnings be based on full-time workers who work 52 weeks per year, shouldn’t the Department then calculate earnings that way in the gainful employment regulation?