The increasing value of a four-year degree
We constantly hear that the value of a four-year degree is declining. Somehow conventional wisdom has it that since the end of the Great Recession college graduates are not enjoying the wage premium over those with less education than previous generations.
Makes an interesting story. But it is not true! The data are clear: the value of a four-year degree is increasing, not declining.
I calculated, using CPS data , the difference in median work earnings for 25-34 years olds in 2017 compared to 2007 for full-time, year-round workers. (This is a calculation of money earnings from all jobs: second jobs, gig jobs, overtime, bonuses, you name it.)
- In 2017 25-34 year old high school graduates had median earnings 57 percent of those with a BA or more compared to 61 percent in 2007. So over a decade the wage premium grew by 4 percentage points.
- For those with some college and no degree the median earnings is 64 percent of those with a four-year degree or more, in 2007 it was 68 percent. The wage premium for those with a BA has grown by 4 percentage points.
- For those with an Associates Degree median earnings are 71 percent of those with a BA of more, in 2007 it was 74 percent of those with a BA or higher. The wage premium has grown by 3 percentage points.
When one looks at the 2017 average work earnings for all workers the value of a four-year degree grows even greater. (No comparison data for 2007 is available.) The value balloons for two main reasons:
- Those with four-year degrees work full-time, year-round more. 56 percent of high school grads were full-time, year-round workers in 2017 compared to 69 percent of those with a BA or more.
- 25-34 year olds with high incomes are way over concentrated in those with a BA or more. As we explored in a previous post, there were 2.61 million 25-34 year olds in 2017 with earnings of $100,000 or more. Of those 2.16 million (83 percent) had a four-year degree.
Average work earnings for anyone who worked in 2017:
- For high school graduates average work earnings are $33,208, 53 percent of the average work earnings of $62,865 for those with a BA of more
- For those with some college, no degree average earnings are $35,344, 56 percent of those with a BA of more
- For those with an Associates Degree average earnings are $38,344, 61 percent of those with a BA of more
Another oft-repeated claim is that employers are over paying those with a four-year degree by requiring a BA for jobs that could be done just as well by those without a BA. So I did the same median work earnings for full-time, year-round workers calculations for 35-44 year olds. To me this deals with the claim that employers over pay for entry level workers with a BA. If that were true the wage premium for 35-44 years olds with a BA should be shrinking compared to those without a BA. At that point employers are giving raises and making promotions based on value in the workplace, not education attainment. What happens? The wage premium for those full-time, year-round workers with a BA or more widens, not shrinks. In 2017:
- 35-44 year olds with an Associates Degree have median work earnings 66 percent of those with a BA compared to 71 percent for 25-34 year olds.
- 35-44 year olds with some college, no degree, have median work earnings 60 percent of those with a BA compared to 64 percent for 25-34 year olds
- 35-44 year olds high school grads have median work earnings 54 percent of those with a BA compared to 57 percent for 25-34 year olds
All of this data adds up to one simple bottom line: the most reliable path today––as it has been in the past––to a middle class or above job is getting a four-year degree. End of story!