The latest data from the Bureau of Labor Statistics show that, for many people, increasing their level of education pays off in higher earnings and lower unemployment rates.
Looking at the chart (which appears on the BLS site) it seems obvious that the path to financial success is to get a college degree—and then an advanced degree. The more education you have, the better off you’ll be. High school graduates, for example, are almost twice as likely to be unemployed as college graduates, and they earn substantially less money per week.
Justin Wolfers, an associate professor of business and public policy at the Wharton School used the BLS data to tweet, “Hey kids, stay in school. What would happen if we put this poster in every classroom?”
Wolfers was reiterating the conventional wisdom, reinforced by the BLS data, that the longer an individual stays in school, the better off he’ll be.
Unfortunately, he missed a crucial detail. All of these statistics are the median—representing the person separating the higher half of a sample from the lower half. It’s a mistake to assume that the median tells us what most people in that group will experience.
Thinking of the median as “typical” masks a lot of important details about educational outcomes.
To start with, note that the data are 2010 median weekly earnings for persons age 25 and over, and earnings are for full-time wage and salary workers. So, everyone is lumped together—regardless of age, the school they attended, their major discipline, their academic performance, and even the field in which they’re working. And anyone working part-time is excluded entirely.
Breaking the data down further is illustrative. Among workers making $20,000 or less annually, 6 percent have master’s degrees or higher, 14 percent have bachelor’s degrees, and 9 percent have associate’s degrees. Among those making between $20,000 and $35,000 annually, 5 percent have a master’s or higher, 15 percent have a bachelor’s, and 11 percent have an associate’s degree.
Those individuals are earning well below the medians for their educational levels. Staying in school didn’t necessarily pay off for them.
The chart also hides an important phenomenon that has become increasingly common in the last few years—unemployment and underemployment among people who have college credentials. As this Gallup poll indicates, as of July 2010 almost 14 percent of those surveyed who had B.A. degrees, and over 10 percent of those with postgraduate degrees, were unemployed or underemployed.
Another reason why the BLS chart is misleading is that it lumps together people of all ages, who are at different levels. People with professional degrees, for example, includes many lawyers who earned their degrees years ago, many of whom have high earnings (the median is $1,610 per week or over $83,000 annually. That information is of no relevance to a brand new J.D., who faces a job market that has shrunken greatly in the last few years. Many recent J.D.s are scrambling to find any job at all.
Furthermore, returns to higher education have been declining for more than 10 years, according to the U.S. Census Bureau. Median starting salary for bachelor's degree recipients in 2009 and 2010 was just $27,000, down from $30,000 in the years 2006 to 2008. The chart gives us a snapshot in time, but trends also matter, and the trend is downward for college degrees.
Earnings also vary greatly depending on the student’s major. Data from the U.S. Census Bureau show that median earnings run from $29,000 for counseling-psychology majors to $120,000 for petroleum-engineering majors.
Is it “worth it” to spend the time and money for a degree in petroleum engineering? If you can do it, probably “yes.” But is it “worth it” to get a counseling degree? That’s far from clear.
Earnings vary based on the college or university attended. Last year, the Pope Center compared schools in terms of their graduates’ salaries in an NCAA Tournament of Starting Salaries. Even this unscientific (but representative) sample revealed large differences between schools—from $29,748 at UNC Asheville to $57,470 at Duke University.
Again, looking only at median figures obscures important details.
An individual should not make decisions based on aggregate data, but rather on data pertinent to his or her particular circumstances. Consider Sue, who just finished high school. Should she go to college? The median earnings for Americans who have already gotten college degrees is irrelevant to Sue.
She needs to think about the cost of college and her own prospects, given her abilities. Nothing in the BLS chart sheds any light on her specific costs-versus-benefits comparison.
Given all the variables, telling all kids to “stay in school” is often bad advice.