Wednesday, September 05, 2012

So does college pay off?

I know there are doubters that are getting louder... but at the end of the day lifetime earnings add up. Below is the differential in wages by educational attainment among those employed.  It's not only the wage differential in itself that matters, but you have to also consider the significantly lower unemployment rates for those with more education that compounds these numbers.   Also some recent commentary from the Cleveland Fed is pretty clear that the premia for higher education is not going away anytime soon. 


10 Comments:

Anonymous Anonymous said...

I'm wondering whether the Census should consider expanding those degrees to master's and doctorate. I'm guessing a larger and larger percentage of "Bachelors or higher" actually DO have "higher" degrees because the pool of candidates is already so saturated with undergraduates. Just a thought.

Wednesday, September 05, 2012 8:11:00 AM  
Blogger C. Briem said...

There is data collected on graduate and professional education. Just a standard of sorts to report it this way. In some places it can still be a small % with graduate education.

Wednesday, September 05, 2012 8:38:00 AM  
Blogger C. Briem said...

In fact the Cleveland Fed link there goes through the bachelor's/graduate issue explicitly.

Wednesday, September 05, 2012 8:40:00 AM  
Blogger Joe said...

"but at the end of the day lifetime earnings add up". Yes, but there is both an opportunity cost (foregone salary), and a real cost to going to university, and those early years, from an NPV perspective, matter most.

As part of a debate with colleagues over the value of our engineering graduate program, I created a spreadsheet to illustrate the importance of those early earning years. Over a 50-year working lifetime, those salary differences don't matter all that much.

Of course, the NPV calculation is very sensitive to all sorts of things: starting salary at HS, BS, MS, PHD level; cost of college; wage increase rate; discount rate, etc.

Wednesday, September 05, 2012 3:15:00 PM  
Blogger Denovich said...

I don't have an advanced degree but I understand that Correlation != Causation.

There is a huge selection bias in effect here, correct?

Wednesday, September 05, 2012 3:26:00 PM  
Blogger C. Briem said...

Is there self-selection? For sure, though I would never suggest it always works out the right way. The inference most make from that is what may be more problematic. Even if a successful person does not need college, if it is the signal the market requires then you still need to go to college. (Weber on Predestination anyone?). In more and more cases it is being codified. Take for example police officers. You need a couple years of college credit to apply for the Pgh Police department currently. Do you need to get those credits to be a good cop? I bet not, but it screens a lot of folks.

As for opportunity cost.. Points for that since opportunity cost is what economists point out as missing in a lot of arguments. Here though I also wonder a bit. Maybe it is better to think about lifetime savings. I bet most not going to college or training after high school are not saving much at all in those 4 years they are not in school. Taking into account the lower earnings at the front end of a career probably obviates most of how the numbers work out.

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