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A degree earns you 98% more

May 29, 2014

U.S. Chamber of Commerce Foundation

With so much discussion focused on the rising costs of a college education, many wonder if college is really worth the investment. The answer: you better believe it.

In a recent article in Science magazine, MIT economist David Autor explores the widening wealth gap within the so-called “99 percent” in which he attributes education as a primary factor. Autor researched the earnings gap between workers with a four-year college degree and those with only a high school diploma.

In 1979, the household median annual earnings gap between college educated and high school educated was roughly $30,000. Today, that gap has expanded to more than $58,000. Autor simply states that, “The single most important factor [of inequality] is the rising return on postsecondary education.”

But what about the high cost of postsecondary education? Is this really a good investment of money and time?

“Yes, college tuitions have risen far faster than inflation, and indeed, student debt has risen rapidly, with more than $100 billion in federal student aid dollars loaned in 2012–2013 alone,” writes Autor. “But the doubling of the college weekly wage differential over the past 30 years also implies that there have been sizable increases in the lifetime earnings of college graduates relative to high school graduates.”

David Leonhardt of The New York Times writes, “The pay gap between college graduates and everyone else reached a record high last year. Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree.”

Still not convinced?

Leonhardt calculates “the true cost of a college degree is about negative $500,000. That’s right: Over the long run, college is cheaper than free. Not going to college will cost you about half a million dollars.”

I don’t know of any college tuition that expensive.

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Discuss this article

Steve Buckstein May 30, 2014

The problem with such pay gap data is that those who earn college degrees generally self-select to do so. Artifiically induce other students to attend college by subsidizing tuitions and other means won’t necessarily earn them such pay premiums.

In Oregon, it’s now public policy to increase the percentage of our population with college degrees, even though research shows that many of the job openings in the future won’t require such degrees. Putting taxpayers on the hook to increase college attendance is poor public policy and should be resisted.

Also, at the time that we are considering further taxpayer funding of higher education, the higher education cost bubble may be about to burst. New technology may just undercut the current higher education economic model. All these factors should lead voters to Just Say No to higher education tax subsidy proposals such as the Oregon Opportunity Initiative that will be on this November’s ballot.


Bob Clark May 30, 2014

There are other problems with this article’s statistical analysis. There is a broad age cohort range in both comparative sets of data. A college education gained in the 70s may have help propel a person to super high income levels as they approach the end of the career and are about ready to retire. Whereas those just now starting their careers after college may not be able to achieve such higher returns on their education as the world is a more competitive place for learned skills than it once was when the U.S dominated the higher education industries.

For instance, when I started work in the early 80s fresh out of college with a Masters of Science degree, the starting salary in the federal government for such education was more than $5k higher than it is today in inflation adjusted dollars. Today, my starting pay would require a doctorate and not a masters.

Then too, we don’t know if the comparison of the two groups is based on the median of both groups instead of the average of the two groups, and whether this makes much difference. I recall here Economist Thomas Friedman’s observation that technology has lead to s very skewed income distribution. Inventers and top managers may be adding significantly to the perception of exceptional return for college education.

W. Chambers June 2, 2014

College wage studies are problematic. You can make the data say anything.

But don’t neglect it.

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