Posted by: Gregory Linton | 06/08/2018

Government report on apprenticeship expansion promotes fake news about economic benefits of higher education

In the last post, I discussed the assertion made by the Task Force on Apprenticeship Expansion that higher education is unaffordable. Now, I want to discuss the second item of fake news promoted in their report–namely, that higher education no longer guarantees a middle-class income.

This unsubstantiated assertion is baffling because all evidence points to the contrary. Around the same time that the Task Force’s report was released, Georgetown University’s Center on Education and the Workforce released “Five Rules of the College Game,” which contradicts this statement. Carnevale and Cheah (2018) assert that “postsecondary education and training have become the most well-traveled pathways to middle class earnings” (p. 3).

They show that the median earnings for someone with a high school diploma is $36,000, but earnings increase to $62,000 for someone with a bachelor’s degree (p. 5). This equates to more than $1 million of additional earnings over a lifetime, which is often referred to as the “wage premium” of higher education. Earnings increase with each level of education attained. Graduate degrees produce $80,000 in median earnings.

College Board’s Trends in College Pricing 2017 reports different figures based on household income, but their statistics also reveal the wage premium of a college degree. They show that the median family income for a household headed by a holder of a bachelor’s degree or higher was $114,640 in 2016, whereas the median income for a family headed by someone with a high school diploma was $54,600 (Figure 17B). This wage premium is more than double.

Even when the cost of obtaining a college degree is deducted from the wage premium, the college graduate still comes out way ahead. College Board’s Education Pays 2016 contains a chart titled “Estimated Cumulative Full-Time Earnings (in 2014 Dollars) Net of Forgone Earnings and Payment for Tuition and Fees and Books and Supplies, by Education Level” (Figure 2.2A). The cumulative net earnings of someone with a bachelor’s degree is $400,000 more than someone with a high school diploma ($1.2 million vs. $800,000). By age 31, the cumulative earnings of a bachelor’s degree holder has already exceeded those of a high school graduate (Figure 2.2B).

Another often overlooked benefit of a college degree is lower risk of unemployment. According to Education Pays 2016, in 2010, 7.9 percent of high school graduates were unemployed, whereas only 4.0 percent of bachelor’s degree holders were unemployed (Figure 2.11). The Great Recession affected employment of high school graduates much more than college graduates. In 2015, the rates were 4.0 percent and 2.1 percent, respectively.

Of course, these statistics are averages, so one can always find college graduates who are unemployed or earn low wages (often the result of the major that they chose). But to make a sweeping generalization that a college degree does not guarantee a middle-class income is overstating the case.

Next post: Does higher education result in unmanageable student loan debt?

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