The Most Predictive Factors of Post-Graduation Wages
Mikhail Zinshteyn: Does earning a college degree matter for future earnings?
Gregory Wolniak: There is simply no other substitute for college education in today’s world.
On average, a worker sees earnings grow 5 percent for every year of college completed within the first few years following college, rising to about 7 to 9 percent decades after college. That’s not even talking about degrees or credentials attained, just per year spent in college. For vocational or associate’s degrees, the earnings benefit compared to just a high-school diploma is roughly 3 to 7 percent. Bachelor’s degree holders make 15 to 27 percent more (than high-school graduates).
Zinshteyn: But what about taking into account the cost of attaining a degree? How does that factor into the equation?
Wolniak: The very best evidence that we have comes from the economists who go to great lengths to take into account all the direct costs, such as tuitions students pay and the fees; and also the indirect costs of attending, like foregone earnings while you’re a student, plus assumptions about how long individuals are likely to work, age of retirement, and taxes paid along the way.
And what they find is that a bachelor’s has a return on investment of 15 to 20 percent. For public-college graduates, the figure is closer to 20 percent. For private colleges graduates, the figure is in the lower end of this range. The difference is because private colleges are more expensive.
Zinshteyn: Do majors matter for earnings over a lifetime?
Wolniak: Majors are the single biggest driver of earnings. Deciding your major plays a bigger role in determining your career earnings than does where you go to school or even deciding whether or not to attend at all. In other words, the average between attending and not attending is less than the differences we see among bachelor’s completers once we compare earnings across fields.
The highest earning majors are in fields such as math, engineering, computer science, information science, and health sciences. The lowest are education and humanities. In the middle you have biology, social sciences, public affairs. Of course, there are other pathways into careers students take across majors. Students majoring in biology are most likely to attend graduate school. So there are differences in earnings down the line. Fields that are rooted in a core competency that are quantitatively based and align with occupations tend to garner the highest earnings.
The difference can be upwards of 40 to 50 percent across majors. It’s not uncommon for engineering majors to make close to 50 percent more than education majors.