Putting a value on higher education

This post is a continuation of the previous post Putting a value on college education. Here we look at the earnings of various levels of higher education relative to “below high school” and relative to high school graduates. The data are obtained from a report in College Board that is called Education Pays 2010. This reports talks about the benefits of the value of higher education to both individuals and society.

In Figure 1.1 of this report, I found information on the median earnings and tax payments of full-time year round workers ages 25 and older for various levels of education in 2008. The following table shows the median earnings.

\displaystyle \begin{pmatrix} \text{Education Level}&\text{Median Earnings in Dollars} \\{\text{ }}&\text{ }&\text{ } \\\text{Below High School}&\text{24,300} \\\text{High School Graduate}&\text{33,800} \\\text{Some college but no degree}&\text{39,700} \\\text{Associate Degree}&\text{42,000} \\\text{Bachelor's Degree}&\text{55,700} \\\text{Master's Degree}&\text{67,300} \\\text{Doctoral Degree}&\text{91,900} \\\text{Professional Degree}&\text{100,000}\end{pmatrix}

To help us compare, I convert the median earnings into ratios using “below high school” as baseline.

\displaystyle \begin{pmatrix} \text{Education Level}&\text{Ratio}&\text{Percent Increase} \\{\text{ }}&\text{ }&\text{ } \\\text{Below High School}&\text{1.0000}&\text{0 percent} \\\text{High School Graduate}&\text{1.3909}&\text{39.09 percent} \\\text{Some college but no degree}&\text{1.6337}&\text{63.37 percent} \\\text{Associate Degree}&\text{1.7284}&\text{72.84 percent} \\\text{Bachelor's Degree}&\text{2.2922}&\text{129.22 percent} \\\text{Master's Degree}&\text{2.7695}&\text{176.95 percent} \\\text{Doctoral Degree}&\text{3.7819}&\text{278.19 percent} \\\text{Professional Degree}&\text{4.1152}&\text{311.52 percent}\end{pmatrix}

For a full explanation on how the math is done, see Putting a value on college education. As an example, I show the calculation for the bachelor’s degree level. The following is the ratio of bachelor’s degree to the below high school level.

\displaystyle \frac{55700}{24300}=2.2922

Thus, the median earning of college graduates is 2.2922 times the median earning of the below high school level, or equivalently 229.22% of the below high school level. Subtracting one from this ratio gives the percent increase going from below high school to bachelor’s degree. This means that the additional amount a college graduate can expect to earn is 129% of the median earning of the below high school level!

In general, the ratio column in the above table gives information about the median earning at each level as a percentage of the baseline (below high school). The column for percent increase gives the percentage increase going from the baseline to each level, that is, the additional earning power at each level expressed as a percentage. It is clear that the higher the educational level, the higher the additional earning power.

Now the same comparison but using the high school level as the baseline.

\displaystyle \begin{pmatrix} \text{Education Level}&\text{Ratio}&\text{Percent Increase} \\{\text{ }}&\text{ }&\text{ } \\\text{Below High School}&\text{0.7189}&\text{-28.11 percent} \\\text{High School Graduate}&\text{1.0000}&\text{0 percent} \\\text{Some college but no degree}&\text{1.1746}&\text{17.46 percent} \\\text{Associate Degree}&\text{1.2426}&\text{24.26 percent} \\\text{Bachelor's Degree}&\text{1.6479}&\text{64.79 percent} \\\text{Master's Degree}&\text{1.9911}&\text{99.11 percent} \\\text{Doctoral Degree}&\text{2.7189}&\text{171.89 percent} \\\text{Professional Degree}&\text{2.9586}&\text{195.86 percent}\end{pmatrix}

With high school graduates as baseline, high school dropouts only earn about 71.89% of the median earning of the high school graduates. The additional earning power of the below high school level is -28.11%, which would actually be a decrease in earning power. Once again, a similar clear pattern here: learning has dollar value. The higher the educational level, the higher the additional earning power. On average, a college graduate can expect to earn 65% (64.79%) more than a high school graduate. The additional earning power for a professional degree is even greater, 195.86%, which is three times the addtional earning power for a college dregree.


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