College Graduates Earn Higher Pay
Encouraging students to go to college is the right choice
November 17, 2011
During a recession, there are bound to be those who would advise students to skip college. This, however, is bad advice. The dim job market, combined with technological advances, is only increasing the demand for more skilled workers. Greater skills requirements mean that more education is needed in established jobs. Stephen J. Rose, my colleague, often provides the example of insurance agents. In the 1950s and 1960s, most insurance agents did not have any college education. Today, 50 percent of insurance agents have a bachelor's degree and only 20 percent have not attended any college.
Employers see those with postsecondary credentials as the most capable of adapting to new economic realities and are willing to pay for it. In 1999, a worker with a bachelor's earned 75 percent more than workers with only high school diplomas; today, that "premium" has risen to 84 percent. In other words, over a lifetime, a bachelor's is worth $2.8 million on average.
In addition to higher pay, college graduates are more likely to be in the labor force and to find jobs faster during periods of unemployment.
For those who look backward in time, insurance agents don't need a bachelor's and the agents with degrees are not utilizing their college skills. But the market tells a different story: Agents with a bachelor's earn 50 percent more than agents with a high school degree. Employers pay more because those with a bachelor's are better at selling complex insurance policies to companies and individuals.
The United States has historically been the world leader in providing mass education to its people. In the 1960s, even though America had the most educated workforce in the world, the rate of college-going among high school graduates doubled compared to that of the previous generation. This investment paid off handsomely as the U.S. maintained the highest living standards in the world and led the way in creating the major breakthroughs of the computer revolution. If history is any guide, encouraging students to go to college is the right choice.
However, our research also shows that earnings depend on the field in which individuals earned their degrees. For example, the degrees and jobs that will pay best and grow fastest will be in STEM (science, technology, engineering, and mathematics) fields and in healthcare. Today's best advice, then, is that high school students should go to college and examine employment and salary prospects associated with the various fields of study before picking a major.