Education and Income
By: Dr. M. Ray Perryman
Published in syndication October 23, 2019
It is widely known that, in general, more education leads to higher incomes. The US Bureau of Labor Statistics tracks median weekly earnings by education level, and recently released a summary of results going back to 2010. The differences are striking and undeniable.
In the third quarter of 2019, the median weekly earnings of full-time workers age 25 and older was $975, meaning that half of workers made more than that amount and half made less. Workers without a high school diploma had median weekly earnings of just $606, while those who finished high school but didn't go to college earned $749. Individuals with some college or an associate degree made $874 per week (median).
The value of finishing college is clearly supported by the data. Workers with a bachelor's degree (and no post-graduate training) had median weekly earnings of $1,281, and having an advanced degree (master's, professional, or doctoral degrees) pushed median earnings to $1,559. In other words, median earnings for workers with a bachelor's degree (without an advanced degree) were about 31% higher than the all-worker median, with advanced degrees 60% higher. Over a career, that difference is huge.
There are a few things to consider in the interpretation of this data. Clearly, education generally increases earnings. However, there are also plenty of examples where people dramatically outperformed (or underperformed) what these medians would suggest. Because they are midpoints, these numbers obscure part of what's happening, and even earnings within each category may vary substantially, as a wide variety of occupations may require the same general level of education.
Within the bachelor's degree category, for example, some majors pay far more than others. There is excellent information online from entities such as PayScale, which tracks compensation including compensation by major and even university. A look at early career and mid-career earnings indicates wide variation by choice of major (which, in turn, is an important determinant of preparation for many occupations). Of course, not all students are well suited to all majors and the related jobs, but it can be eye opening to see the variation across fields of study.
Future compensation is particularly important if college involves student loans. Taking on significant debt for a major that tends to involve low compensation can lead to financial stress, and students and their families should examine future costs and benefits very carefully before making such commitments. Surveys of graduates indicate that student loans are a source of regret later in life for many, particularly those in lower-paying majors.
There is no one-size-fits-all recommendation, and student interests and aptitudes clearly come into play. Even so, the overall pattern is very clear. More education generally equals more earnings