A college degree usually leads to higher income, but the payoff varies by degree and discipline, concludes The Economic Benefit of Postsecondary Degrees, an analysis by Katie Zaback and Andy Carlson of State Higher Education Executive Officers and Matt Crellin of the National Center for Higher Education Management Systems.
Bachelor’s degree graduates have a median income of $50,360 compared to a median of $38,607 for associate degree graduates and $29,423 for people with only a high school diploma, the report finds. However median earnings and the wage premium — the difference between a college graduate’s pay and what a high school graduate would earn in the same field — vary significantly.
The average wage premium for an associate degree is 31.2 percent, but that ranges from 23.3 percent in education (probably early childhood education) to 73.9 percent in health fields. Median income ranges from $23,175 for an education-related associate degree to $45,343 for STEM degrees.
Median pay also varies considerably for workers with a bachelor’s degree. As with associate degrees, the highest wage premium is in health care: The 123.4 percent wage premium leads to a median income of $56,427.
The demand for college-educated workers has outpaced the supply, concludes The Undereducated American, a new study by the Georgetown University Center on Education and the Workforce. The weak economy has hidden the problem, says Anthony P. Carnevale, co-author of the report. “In recession and recovery, we remain fixated on the high school jobs that are lost and not coming back. We are hurtling into a future dominated by college-level jobs unprepared.”
The U.S. economy will need an additional 20 million postsecondary-educated workers by 2025, Georgetown predicts. This includes 15 million with bachelor’s degrees, one million with associate degrees and four million with vocational certificates. Adding these new graduates will stop the rise of income inequality, according to the report, which predicts wages will rise 24 percent for high school graduates, 15 percent for those with an associate degree and 6 percent for bachelor’s degree holders.
All this jibes with President Obama’s push to make the U.S. first in the world in college graduates by 2020, points out Inside Higher Ed.
The shortage of college-educated workers has created a rising wage premium, write Carnevale and co-author Stephen Rose.
College graduates earn 74 percent more than do high school graduates today — a gap that is up from 40 percent in 1980.
. . . (Adding 20 million college-educated workers) would not only allow the wage premium to shrink to 46 percent, much closer to what it was in 1980, but increase the gross domestic product by about $500 billion over what it would be without those better-educated, higher-earning workers.
Increasing college-going and graduation rates requires spending more on higher education — unlikely, Carnevale concedes — or making higher ed more efficient.
Higher education has not historically been inclined to look for efficiency, but it is likely that “as money slims down, there will be kicking and screaming, and higher ed will move toward efficiencies,” he said.
A bachelor’s degree pays off even for secretaries, plumbers and cashiers, asserts New York Times columnist Dave Leonhardt, citing the Georgetown report.
“Sending more young Americans to college is not a panacea,” says David Autor, an M.I.T. economist who studies the labor market. “Not sending them to college would be a disaster.”
About 33 percent of young adults earn a bachelor’s degree and another 10 percent receive a two-year degree, Leonhardt writes.
Financial aid cuts the cost: “Average net tuition and fees at public four-year colleges this past year were only about $2,000 (though Congress may soon cut federal financial aid).”
Meanwhile, the wage premium for college graduates has soared.
According to the Hamilton Project, “college tuition in recent decades has delivered an inflation-adjusted annual return of more than 15 percent. For stocks, the historical return is 7 percent. For real estate, it’s less than 1 percent.”
Perhaps “college filters out people with low cognitive ability, low conscientiousness, and other adverse traits,” writes Arnold Kling.
My elitism comes from the few years I spent as an adjunct at George Mason. The typical undergrad in my course could not write a paper or solve an algebra problem. I doubt that adding more students at this margin is the way to raise people’s incomes.
College attainment will boost economic growth only if it increases cognitive skills, responds Andrew Gillen of the Center for College Affordability and Productivity, citing studies by Eric Hanushek and Ludger Woessmann. “Recent research (such as Academically Adrift) calls into question how much college boosts cognitive skills,” wrote Gillen in an e-mail to Inside Higher Ed.
The way to reduce income inequality is to fix our schools, Gillen writes in a blog post.
I don’t see much point in sending more high school graduates to college to take eighth-grade reading, writing and math.
Despite tales of college graduates working as cashiers, college is still worth it, argues Anthony Carnevale of Georgetown’s Center on Education and the Workforce in Inside Higher Ed. Bureau of Labor Statistics data misses a shift in the economy: Employers are requiring postsecondary credentials for jobs that didn’t use to require a two- or four-year degree, he writes.
Examples in the white-collar world include increasing demand for college degrees among managers, health care workers, and a wide variety of office workers, from insurance agents to building inspectors. Examples in the blue- and pink-collar world include increasing degree requirements among production workers, health care technicians, and utility and transportation workers.
Simple, repetitive tasks have been automated. Workers need to perform more sophisticated tasks that require more skill, training and education, Carnevale writes. Employers are paying a wage premium to hire workers with college credentials.
Bartenders, cab drivers and janitors with bachelor’s degrees will move to better jobs, he writes. “Over a 10-year period, each cashier job has 13 incumbents who permanently leave the occupation; among medical doctors, that replacement rate is only one.”
There is a higher education bubble at the bachelor’s degree level, writes Peter Wood of the National Association of Scholars. As the recession pushes more four-year graduates into low-level jobs, high school graduates are getting cagier about borrowing to take the traditional college path to a career.
More and more students are enrolling in lower-priced community colleges either to take a terminal associate’s degree or to transfer as juniors to a senior college. And online education is luring more and more students to the idea of gaining college credentials through part-time study while working full-time.
All it would take for higher education’s bubble to pop would be a significant increase in the percent of students defecting to community colleges or online programs. Perhaps as little as a ten percent shift would pose dramatic problems for the expensive second-tier private colleges.
Career colleges are growing rapidly, according to a new Carnegie Foundation report. The focus of higher education is shifting from liberal arts colleges to professional training programs in business, health, education and law.
The majority of the new institutions—77 percent—are from the private for-profit sector. The growth in public institutions and private not-for-profit institutions has been minimal, accounting for only 4 percent and 19 percent of the newly classified institutions respectively.
In addition, more two-year colleges are adding bachelor’s degree programs.