March8

The huge BA earnings premium for 25-34 year olds

The story we are told over and over again is for today’s students getting a four-year degree is no longer a good value for many. It may have been for their parents’ generation, but no more. Everything from student loans college graduates can’t afford because of low salaries; to employers getting smart and now hiring for skills, not degrees; to the skilled trades pay as well, if not better, for those who don’t have STEM degrees; etc.

The only problem is that the data from the 2018 Current Population Survey tells the exact opposite story. 25-34 year olds with a four-year degree or more have work earnings far higher than those with lesser education attainment. The chart at the end of this post has the detailed data.
25-34 year olds with a BA or higher have median earnings from work of 177 percent of those with a high school degree and 149 percent of those with an AA. The average earnings premium is even higher: 196 percent compared to those with a high school degree, and 159 percent compared to those with an AA.

Just as it is for all workers, the reality is for 25-34 year olds the higher the education attainment the higher the work earnings every step up the education attainment ladder. With, by far the biggest step being between those with an AA and those with a BA or more. With medians nearly $17,000 higher annually compared to a median premium of more than $5,000 for an AA compared to a high school degree.

The story that others’ kids should forgo pursuing a four-year degree almost always includes some so-called professional trade paying $100,000: welding, coding, auto mechanic, you name it. Once again the data tell a very different story. If you click on the CPS link earlier in this post you will find earnings for 25-34 year olds by $2,500 increments by education attainment in 2017.

What you will find is that lower earnings cohorts are dominated by those without a four-year degree, while higher earnings cohorts are dominated by those with a four-year degree. Are there some without four-year degrees who have high earnings? Of course. Are there some with four-year degrees with low earnings. Of course, too. But what the data clearly say is that getting a four-year degree is the most reliable path to the middle class when you are 25-34 years old.

So what about those making six figures? There were 2,769,000 25-34 year olds in 2017 with earnings of $100,000 or more. Of those 2,277,000 (82 percent) had a four-year degree. In 2017 21,476,000 25-34 year olds without a four-year degree had work earnings. Of those 492,000 (2.3 percent) had work earnings of $100,000 or more. Of the 15,508,000 25-34 year olds with a four year degree 14.7 percent made six figures.

As we have written frequently most of those telling kids not to get a four-year degree are doing the exact opposite with their own kids. Most affluent parents are preparing their kids for four-year degrees from preschool on. They are doing so because they know this reality: That the most reliable path––even with a student loan––to a good-paying career is to obtain a four-year degree or more.

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Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 2 Comments

  1. This is not directly about your post, but I think you will be interested in it. I just read a feature article in Bloomberg Businessweek from March 25. The title of the article sounds like it is anti-college, but it is really about changing the teaching and testing methods used in college and on the ACT and SAT tests. It is actually much more positive than the title indicates. I think the ideas in the article could be very positive on how college is done. I imagine you have read or will read it anyway. But I would like to see you discuss the ideas in your blog.

    1. Wow! Thanks for sharing. I had not seen the article. The kind of skills she is designing the test for and wants schooling to build through project-based teaching and learning are exactly the right skills that all students are going to need to succeed today and beyond. Obviously she has not identified how to build the skills she wants to test. Our learnings are for most students those skills are best built through the liberal arts and in human community (not online) with the kind of rigor and depth that is offered best at the moment in four-year universities. And we believe that the labor market premium––particularly in second jobs and beyond––that four-year degree holders are earning is because of these broader skills, rather than superior occupation-specific skills.

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