College degree still worth the investment, data suggest

College degree still worth the investment, data suggest

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College degree still worth the investment, data suggest

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wwltv.com

Posted on June 24, 2014 at 10:17 AM

Mary Beth Marklein, USA TODAY

Despite rising tuition and falling wages, college graduates continue to earn far more over a lifetime than a worker with no more than a high school diploma, an analysis of four decades of federal data shows.

The main reason is that average wages also have declined for workers with no more than a high school diploma. The gap between wages for college graduates and those without a college degree remain near all-time highs.

"Investing in a college degree may be more important than ever before because those who fail to do so are falling further and further behind," says the report, released Tuesday by the Federal Reserve Bank of New York.

Calculations, based on the cost of college, the wages foregone by being in school and wages after graduation, show that the return on investment for earning an associate's or bachelor's degree, about 15% over the past decade, "easily" surpasses the threshold for a sound investment -- about 7%, economists Jaison Abel and Richard Deitz write in the report, titled Do the Benefits of College Still Outweigh the Costs?

Areas of specialization also influence earnings. Among workers with a bachelor's degree, engineering majors earned the highest returns, 21%, while education majors earned the lowest, 9%. Liberal arts majors posted a 12% rate of return.

The study calculates federal data on wages for full-time workers ages 16-64 between 1970 and 2013 for workers in three categories: those with no more than either a high school diploma, associate's degree or bachelor's degree. It also assumes that a bachelor's degree is earned in four years and an associate's in two -- not the case for significant numbers of students.

Among details:

• Over the past four decades, those with a bachelor's degree generally earned 56% more than high school graduates and those with an associate's degree 21% more than a high school graduate.

• Between 1982 and 2001, bachelor's degree holders earned an average 80% more and associate's degree-holders almost 30% more than workers with no more than a high school diploma. Average wages increased 31% for workers with a bachelor's degree and 12% for those with an associate's degree. Wages were unchanged for high school graduates.

• Between 2001 and 2013, the wage premium reached 75% for bachelor's degree holders and more than 20% for those with an associate's degree. But average wages declined 19.3% for workers with a bachelor's degree, 11.1% for those with an associate's degree and a more modest 7.6% for high school graduates.

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