New Report Confirms that Higher Education Benefits Students and Society

Sandra Baum, Jennifer Ma and Kathleen Payea of the College Board Advocacy & Policy Center released a document in September titled Education Pays 2010: The Benefits of Higher Education for Individuals and Society as part of the center’s Trends in Higher Education Series. 

The report provides crystal clear evidence that higher education makes a huge difference in the lives of degree holders in many ways, including finances, and that persistent disparities in college participation and completion are leaving large segments of the American population behind. The uneven rates of enrollment and completion in higher education across different segments of the American population should be a critical concern to our nation.

Unemployment Rates Among Individuals Ages 25 and Older, By Education level, 1992-2009

Unemployment Rates Among Individuals Ages 25 and Older, By Education level, 1992-2009

The evidence is overwhelming that higher education improves people’s lives, makes our economy more efficient, and contributes to a more equitable society. The existing gaps in participation and success are detrimental not only to individual lives, but also to society as a whole.
As an educator, I see the benefits in broad terms. Higher education has the potential to transform people’s lives in positive ways by broadening their horizons, helping them develop critical and analytical thinking skills, fostering an appreciation for diversity and seeing multiple perspectives on issues, and enhancing their future job satisfaction.
Education Pays 2010 found numerous nonmonetary benefits to individ-uals who earned bachelor’s degrees. It confirmed my view that higher edu-cation enhances job satisfaction. People with bachelor’s degrees and higher are more likely to be very satisfied with their work, and they report that their work seems important and gives them a sense of accomplishment.
The researchers also found that college-educated adults are more likely than others to receive health insurance and pensions from their employ-ers. College-educated adults are more likely to be active citizens, donating their time to volunteer activities and voting, than high school graduates. Additionally, college-educated adults smoke less, exercise more, are more likely to breastfeed their babies, and are more likely to have lower obesity rates. When the health risks of smoking became public, and ever since, smoking among college graduates has been on the decline.
Thus people holding college degrees are more likely to have healthier lifestyles than others – and this reduces health care costs both for the indi-viduals themselves and for society.
Level of education is also correlated with engaging in educational activities with their children. The percentage of parents who read to their children, for example, is positively related to their own level of education – the more edu-cation parents have, the more they read to their children. Their children are better prepared for school than children of less-educated parents.
In today’s world, many people analyze the benefits of higher education only in terms of dollars and cents. Does a college education pay off finan-cially? With the current cost of tuition and a contracting job market, that question is legitimate. If one were to focus specifically on the question of the financial benefits of higher education, the answer would be an unequivocal “Yes.”
That affirmative answer applies not only to the individuals themselves who earn the degree, but the financial payoff is to society at large. Higher education obviously provides a great return on the investment. As the report states, federal, state and local governments enjoy increased tax rev-enues from college graduates and spend less on income support programs for them, providing a direct financial return from investments in postsec-ondary education.
In addition, social support programs such as the Food Stamp Program and the National School Lunch Program were far less likely to support col-lege graduates (about 1 percent) than high school graduates (8 percent) in the year 2008. Incarceration costs are also far lower for college gradu-ates than for high school graduates.

Note: Based on the sum of median 2008 earnings for full-time year-round workers at each age from 25 to 64 for each education level. No allowance is made for the shorter work life resulting from time spent in college or out of the labor force for other reasons. Future earnings are discounted at a 3 percent annual rate to account for the reality that, because of forgone interest, dollars received in the future are not worth as much as those received today. This represents real interest, as all earnings are in 2008 dollars. Discounting does not have a large impact on the lifetime earnings ratios. Sources: U.S. Census Bureau, 2009; calculations by the authors

Note: Based on the sum of median 2008 earnings for full-time year-round workers
at each age from 25 to 64 for each education level. No allowance is made for the
shorter work life resulting from time spent in college or out of the labor force for
other reasons. Future earnings are discounted at a 3 percent annual rate to account for
the reality that, because of forgone interest, dollars received in the future are not
worth as much as those received today. This represents real interest, as all earnings
are in 2008 dollars. Discounting does not have a large impact on the lifetime earnings
ratios.
Sources: U.S. Census Bureau, 2009; calculations by the authors

Looking at financial benefits for the individuals themselves, the report states that not only are people with higher levels of education much more likely to earn more money across their lifetimes, they are also more likely to be employed. The report states that in 2006 there was a 2.3 percentage point difference between unemployment rates for college graduates com-pared with high school graduates. In 2009, the increase in unemployment difference between bachelor’s degree holders and high school graduates increased to 5.1 percent.
Comparing unemployment rates between people with at least a B.A. degree with high school graduates shows that for the former group, unem-ployment rates are consistently about half. One accompanying chart pro-vides a visual representation of unemployment rates among adults 25 and older, by educational level, for the time spread 1992 to 2009. The chart shows that those with higher levels of education are more likely to be employed and that the pattern is consistent over time.
Despite the fact that unemployment rates are higher for Blacks and Hispanics in our society than for Whites, unemployment rates decrease markedly as the level of education increases for these groups.
Certainly in the current recession, we have seen increases in unemploy-ment among college graduates. Between 2008 and 2009, the unemploy-ment rate for college graduates rose from 2.6 percent to 4.6 percent. However, for high school graduates the unemployment rate increase is far sharper – rising from 5.7 percent to 9.7 percent. By early 2010, data show a recovery in employment but only for college graduates.
In 2008, the median earnings of bachelor’s degree recipients working full time year round were $55,700. Their salaries were $21,900 more than those of high school graduates. Having some college but no degree also translated to earnings 17 percent greater than those with only a high school diploma.
Median tax payments of full-time employees with professional degrees were more than three and a half times higher than those of high school graduates. After-tax earnings were almost three times higher for profes-sional degree holders. The average person holding a B.A. degree will prob-ably earn about two-thirds more than a typical high school graduate over a four-decade working lifespan.
The report shows that the financial benefits associated with additional years of education beyond high school and the gaps in earnings by educa-tional attainment have both increased over time. Note that in 2008, women between age 25 to 34 with a B.A. degree or further graduate education earned 79 percent more than the median earnings of women with a high school diploma. For men of the same age and in the same year, the median earnings increase was 74 percent. Compare the median earnings for both groups just a decade earlier – the numbers were 60 percent and 54 per-cent, respectively. The gaps in earnings are widening.
Another chart shows the expected lifetime earnings of all levels of edu-cation as compared to high school graduates. The data show the greater earnings ratio of people with some college but no degree and then the marked increases at all levels of degree achievement from associate degrees to professional degrees. From the perspective of the strictly monetary payoff of a college education, the numbers are dramatically persuasive.
Not only do we see income gaps between the college-educated and those without college, gaps in educational attainment also exist between White middle-class students and low-income and minority students, and again, those gaps are widening. In the time period 1998 to 2004, the gap between White and Black high school graduates who enrolled in college within a year of high school graduation fluctuated between eight and 10 percentage points. By 2008, that gap increased to 14. Enrollment gaps between White and Hispanic students have narrowed between 2000 and 2008, from 19 points in 2000 to eight in 2008. While that narrowing is encouraging news, the persistent degree completion gap between Whites and Hispanics is discouraging especially given the projected growth in the Hispanic population.
The research shows that enrollment patterns differ across income lev-els, and that graduation rates are a function of type of institution attended. For example, in AY 2007-08, 40 percent of students from families with income levels below $40,000 enrolled in public two-year colleges and 8 percent enrolled in for-profit institutions. Only 17 percent of students from families with incomes of $120,000-plus enrolled in public two-year col-leges, and 1 percent attended for-profit institutions.
The report notes that, in general, high school graduates from low-income families, those students whose parents did not go to college, and Black and Hispanic students have lower college enrollment rates and have much lower educational attainment rates. The researchers attempt to ana-lyze these demographic disparities.
Baum et al. say that while enrollments for Black and Hispanic students have risen over time, they chase a moving target of White and Asian college enrollment rates. Since the data show that type of institution attended is correlated with degree completion, the researchers question whether focusing on enrollment is sufficient. Should the focus also include helping students from these demographic groups choose institutions that are a bet-ter academic match for them? The report cites previous research support-ing their findings related to the undermatch phenomenon – the probability of earning a B.A. degree is significantly increased by enrolling in the most selective institution for which students qualify.
For full-time students who started studying toward a B.A. degree at a four-year college or university, 57 percent earned the degree within six years from that institution. Completion rates averaged 65 percent at private colleges and universities (nonprofit), 55 percent at public four-year insti-tutions and 22 percent at private for-profit institutions.
Another finding worth noting is that within each racial/ethnic group, bachelor’s degree completion rates are more than twice as high in the pri-vate not-for-profit sector as in the for-profit sector. Moreover, completion rate gaps between Black students and White and Asian students are larger in the for-profit sector than in the public and private not-for-profit sectors.
The STEM fields (science, technology, engineering and mathematics) are critical for America to be competitive in a global, knowledge-based economy. Here again we see demographic differences both in enrollment and in degree completion. Male students are about twice as likely as female students to enroll in STEM fields. About 40 percent of both men and women who enter STEM fields complete some type of credential; about one-fourth of both male and female students earn a bachelor’s degree in a STEM field.
About twice as many Asian students as White, Black or Hispanic stu-dents enroll in a STEM field, and of those, completion rates are lowest for Black and Hispanic students. Only 16 percent of Black and Hispanic stu-dents who enroll in a STEM field earn a B.A. degree compared to about 30 percent of Asian and White students who do so.
The research emphasizes that the focus for improving educational opportunities should be twofold: First, it should involve finding ways to provide opportunities for both postsecondary preparation and access. Second, the data indicate the focus should be on helping more students make decisions that maximize their chances for degree completion.
The complete report can be downloaded at http://trends.college-board.org.