Publihighered

Updated B.A. earnings premium for 25-34 year olds

2018 work earnings data are now available from the Current Population Survey. What follows is an update of an earlier post now with 2018 data.

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 data from the 2019 Current Population Survey tells the exact opposite story. 25-34 year olds with a four-year degree or more had work earnings in 2018 far higher than those with lesser education attainment. The chart at the end of this post has the detailed data.

In 2018 25-34 year olds with a B.A. or higher had median earnings from work 170 percent of those with a high school degree and 148 percent of those with an Associates Degree. The average earnings premium is even higher: 183 percent compared to those with a high school degree, and 158 percent compared to those with an Associates Degree.

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 as you move up the education attainment ladder. With, by far, the biggest step being between those with an Associates Degree and those with a B.A. or more, with medians $17,000 higher annually. You read that right: the typical 25-34 with a four-year degree or more earns $17,000 a year more than the typical 25-34 year old with an Associates Degree.

The median premium for those with a Bachelors Degree or more compared to a high school degree is more than than $21,000 a year. The median premium for an Associates Degree compared to a high school degree is less than $4,000 a year.

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 2018. 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. Also, of course. 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 2.79 million 25-34 year olds in 2018 with earnings of $100,000 or more. Of those 2.22 million had a B.A. or more. In 2018 21.60 million 25-34 year olds without a four-year degree had work earnings. Of those 2.5 percent (567,000) had work earnings of $100,000 or more. Of the 16.03 million 25-34 year old workers with a four year degree 13.8 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.

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