Sept. 13, 2007

The (Non-Monetary) Value of a College Degree

With all the recent focus on accountability and “value added” by a college degree, it’s still common for a conversation on this topic to come down to individual earning potential. And a new report from the College Board has plenty of data to back up the well-worn claim that college graduates can expect significantly higher wages over their lifetime than their counterparts.

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But perhaps its more significant contribution to the dialogue is, as the co-author Sandy Baum puts it, the quantification of non-monetary benefits. To that end, “Education Pays: The Benefits of Higher Education for Individuals and Society,” can be seen as part of a growing campaign to frame higher education as not only a private investment but as a public good.

The report, a follow-up to the original 2004 publication that included many of the same indicators, uses data from the Department of Education, the U.S. Census Bureau and surveys by other higher education groups. One of its main assertions (also backed by plenty of data): College graduates are more engaged citizens and make healthier decisions than those who don’t earn a diploma. Thus, the report argues, higher education has a high rate of return for society. A more educated work force means greater tax revenue and a stronger democracy.

“A lot of civic benefits are network benefits,” said Suzanne Morse, president of the Pew Partnership for Civic Change, who participated in a College Board panel Wednesday on Capitol Hill. “Your ability to communicate well is more important when the rest of your community can communicate well.”

As is common for a report that measures civic engagement, “Education Pays” reviews recent data on voting — in this case from the 2004 presidential election. In every age category, college graduates cast ballots at a higher rate than those who didn’t receive a diploma. The trend is particularly pronounced for the 25- to 44-year-old group, in which 76 percent of college graduates voted, compared with 49 percent of high school graduates.

Rates of voluntarism also rise with education level. Forty-three percent of those surveyed with at least a bachelor’s degree said they volunteered in 2006, and they reported doing so for a median of 55 hours. Fewer than 20 percent of high school graduates reported volunteering, and the median for them was 52 hours.

However you classify it — intellectual curiosity, empathy, etc. — those with the highest degrees were more likely than others to say it’s important to understand the opinions of others. The measure, taken in 2004, shows that nearly 8 in 10 adults with advanced degrees and 73 percent with a bachelor’s degree said that having such an understanding was “very important.” About 65 percent in the high school graduate category agreed with that statement.

At every age and income level, the report shows that there’s some correlation between more education and better health. Those with a bachelor’s degree or higher most often reported being in “excellent” or “very good health,” according to a 2005 survey from the National Center for Health Statistics. That statistic is especially significant for the 65-and-older set, with 70 percent of college graduates falling into the above category vs. only 45 percent of high school graduates.

Graduates of a four-year college are also less likely to smoke than their peers. Of those 25 or above, roughly 25 percent of people whose educations stopped at high school smoke, compared with 10 percent of those who earned a bachelor’s degree or higher, according to the National Health Interview Survey. Only five percent of people listed as current smokers who are college graduates did not try to quit within a year of being interviewed for the survey, while 16 percent of high school graduates had not attempted to stop.

Those who finished college also reported being more active. In 2005, for instance, more than 60 percent who were in the 25-34 age range said they exercised “vigorously” at least once a week. That’s compared with 31 percent of high school graduates who said the same.

“The data does seem to be evidence that, controlling for other factors, having more education leads to better health decisions,” said Michael McPherson, president of the Spencer Foundation, a group that supports research about education. “Part of what’s going on in colleges is that students are thinking about themselves in a different way and thinking in terms of long-term goals.

“We tend to think of colleges as endowing particular skills, and this seems to show that students are getting a deeper knowledge,” he added. “We should pay attention to this, especially in an era when we pay so much attention to financial benefits.”

Still, McPherson agreed that academe needs to do a better job of understanding how, exactly, it helps change behavior. And, as the report makes clear, the correlation-causation issue is important to consider. In other words, it’s hard to tell how much of the disparity cited is a result of students completing four years of college or, say, simply a product of their background.

Morse said it’s logical to believe that there are factors other than educational attainment at play, such as if a student’s parents smoke. Baum, a Skidmore College economist and senior policy analyst at the College Board, said that while the statistics likely “inflate slightly” the importance of college in changing some behaviors, its role as change agent shouldn’t be discounted. (She also points out that while the report focuses on education benefits that can be quantified, there are many others that don’t fit into charts.)

As previously noted, “Education Pays” summarizes some recent — and hardly surprising — data on the financial benefits of earning a colleges degree. It says that after adjusting for inflation, the earnings of male college graduates are no higher now than they were in the early 1970s, and the earnings of female graduates have increased only moderately. But those with less than a college degree have also been a part of that trend.

And the gap between the earning potential of college graduates and high school graduations is only widening, the report notes. For instance, in 2005, a person with a professional degree could expect to make $100,000 a year, compared with less than $32,000 for a high school graduate and $51,000 for a graduate of a four-year college.

Over a lifetime, the expected typical earning of a four-year college graduate is $800,000 more than the expected earning of a high school graduate. If college graduates who also earn higher degrees are included, that lifetime earnings premium rises to more than $1 million. Among 25- to 34-year-olds, the earnings premium for college graduates is highest for Asian and Hispanic males. The premium is higher for black women than for women of other racial and ethnic groups.

The report also notes that the availability of employer-sponsored health benefits and pension plans increases with every level of education attained. More than two-thirds of full-time employees with at least a bachelor’s degree have access to pension plans, while only 53 percent of high school graduates have the same access. The level of participation in the available pension plans also increases as education level rises.

Responding to a question about some of the racial and socioeconomic disparities pointed out in the report, Baum said that colleges have done a much better job getting low-income and minority students into college than getting them through. That, the report says, should be a source of public policy concern.

“Our democracy will suffer if the only people who vote are white,” Morse said. “We’re moving toward a point where the voting pattern isn’t reflective of the population in general.”

— Elia Powers

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Comments

Correlation Does NOt Equal Cause & Effect

This article makes unjustified inferences from the data. All the data show is that those with college degrees exefcise more, are more civicly engaged, etc. They do not show that the reason for these penomina is the college degree. There is an obvious correlation, but nothing suggests a cause and effect. Someone who is not inclined to exercise or being engaged in civic activity is not necessarily more likely to be more so inclined by going to college, and those who are so inclined are not necessarily less likely to be so if they do not finish college. Thus, claiming that these effects are part of the value of having a college degree is not warranted or supported by the raw data.

Gary, at 7:55 am EDT on September 13, 2007

Of course Gary is correct. A few things stand out to me in addition.

(1) This report and article are not so subtle ways for the higher education sector to demand more tax subsidies. And after 30 years of hearing that sector screaming about declining public support, it is hard to consider this seriously.

(2) To take but one example, I am not convinced that having more people voting is necessarily an important policy objective.

(3) The same people who write this are the same folks that like to argue that standards of living have not improved over the past 30 years. They do this by looking only at income and earnings, and totally ignore any non-wage compensation (leaving aside the issue of whether even these income figures reflect what it is suggested they reflect … i.e. inflation measurements and difference in cohorts make average income data in the cross-section over time hard to interpret). Why are non-pecuniary factors so important when it comes to measuring the value of higher education, but when it comes to assessing American living standards, they are sneered as being irrelevant? You can’t have it both ways.

Mike, at 8:45 am EDT on September 13, 2007

..and

How does one square the possibility that if college graduates have better jobs and are more likely to have better health insurance, that is the reason they have better health?

And if civic participation is improved, and we get better democracy, how come partisanship seems to be at all-time high and that as a country we more divided than ever? And clearly this is the case in Congress and state assemblies across the nation, where most members have college degrees.

If you look at the cities or regions with the highest concentration of college graduates, one would assume these would be oases of reason and good living. Unfortunately, they tend to be places where housing costs are out of control, traffic congestion is nightmare, taxation is high, and only those with money and education actually have good healthcare.

Or maybe I am confused as to what a “public benefit” truly is...as I see it, the benefits described are still private.

Randy, at 9:15 am EDT on September 13, 2007

Correlation does not equal causation...so then what?

Other comments have correctly pointed out the difference between causation and correlation.

While that may be a fair criticism, it is not clear how future studies can avoid this problem. Clearly researchers cannot “randomly assign” students to college and non-college attending groups, so any kind of “true experiment” is out of the question.

How, then, might future studies be designed to avoid the criticism about causation / correlation?

T-bone, at 9:35 am EDT on September 13, 2007

Equity

So going to college makes you a better person,a better citizen, and you get richer too.

Well now, I do believe that education is good for people and the educated people are good for society. Some, like H.L. Mencken would not agree.

But I wonder about the fininacial benefits we so often claim for our product? Do the benefits accrue over all disciplines or is this a grand mean that takes into the calculation the inflated salaries of some majors that mask the loss of actual overall income by others? I mean in Oklahoma City for instance after teaching 30 years with a masters degree you will earn less than an entry level first year Pharmacist. If both students took out student loans in the same amount, the Pharmacist can pay his off in let’s say 8 years, and the teacher maybe 20 or more. Where is the equity in that? Most states claim they pay 25 to 30% of the actual cost of educating a college graduate. That again is a mean. In effect it cost a state about 15 to 20 times to graduate a pharmacist as it does a masters degree teacher. So who is subsidizing whom? Does that mean the teacher is borrowing money to pay 400% more for their degree than it actually cost? While at the same time in the same university the pharmacy student is paying 5% or less of his actual cost? Why does anyone bother? Because they believe. What happens when the dream and reality collide?How about publishing a study that shows what really happens, what the real cost/benifits are?

Never mind, they wouldn’t let me do it either when I was in the game.

Joe Hagy, at 9:35 am EDT on September 13, 2007

everyone is average

We need to get away from the line that something that is good on average is good for everyone. We need to look closer at what type of student benefits from what type of education if any beyond high school. It is clear that we have many people at universities who would be better off in a job training program, and yet there plenty of bright kids who do not get the chance to go to college.

math prof, at 10:15 am EDT on September 13, 2007

Practical significance

Statistically speaking Gary is correct. However, the view that there is no cause and effect because the statistics do not support that view is somewhat shortsighted. The logic of the report suggests a positive correlation between college attendance and enhanced attitudes toward exercise. According to the National Intramural and Recreational Sports Association (NIRSA) 75% of students on college campuses participate in recreational sports and fitness related programs. Our recreational sports facility at Ohio University experiences approximately 700,000 visits per year and there are times when the facility is so crowded students can not get into our weight room or fitness room. One would think that if students were participating in exercise related activities at such high rates that they would be developing a habit of routinely exercising. Perhaps we should look at the practical as much as statistical significance when interpreting this report.

Douglas Franklin, Doug, at 10:20 am EDT on September 13, 2007

1. “Someone who is not inclined to exercise or being engaged in civic activity is not necessarily more likely to be more so inclined by going to college..” Of course they are if they are exposed to different ideas and activities on campus! Much of what we pick up comes from our environment. College environments that encourage civic involvement and good health yield aware students. Call is cause/effect or correlation or whatever you want to call it. It’s about influences, good, bad, or otherwise. Sure, not every student at every moment does participate, but at least the awareness is there. That’s more than can be said for lots of other environments.

2. “I am not convinced that having more people voting is necessarily an important policy objective.” WHAT??? How can you possibly say this when even still with so many positive influences on campus and such high numbers of positive “correlation", too many students remain apathetic, unaware of the issues, and ignorant of their responsibilities? To boot, many students have formed the belief that “voting is useless.” I am sure they have Florida to thank in part for that attitude. These students need to be (re) empowered. If you want to educate, you need to educate students about the world, not just their disciplines.

3. “Why are non-pecuniary factors so important when it comes to measuring the value of higher education, but when it comes to assessing American living standards, they are sneered as being irrelevant?” The standard of living hasn’t risen because the population has grown and the poverty level has risen which impacts the numbers. The numbers in this report reflect only those who went to college. They do not account for the vast numbers of students who drop out, come into the country WITH college degrees, etc. I am sure “Stat Gary” will argue numerically with me on this one, but I can find reports from a variety of sources outside of education that support this idea.

4. “And if civic participation is improved, and we get better democracy, how come partisanship seems to be at all-time high and that as a country we more divided than ever?” Because every time someone pushes his/her party, the other group pushes back harder until there is congressional and social gridlock. These attitudes filter down to the general public via the media. This particular phenomenon isn’t really about education. It’s about group dynamics and character and critical thinking which obviously need to be addressed more in college classrooms than ever before. Outside of that, Congress and academics don’t really represent the common person who either doesn’t have time to engage in that kind of useless behavior or just joins in without thinking (hence the need for even more college accessibility), so your perspective is a bit skewed.

5. “Unfortunately, they tend to be places where housing costs are out of control, traffic congestion is nightmare, taxation is high, and only those with money and education actually have good healthcare.” The shrinking of the middle class and the increase in poverty helps account for this. To boot, many college students STILL go without proper health care which doesn’t make things any easier even if they are engaging in healthy practices.

Finally, students gain exposure to and experiences in college they could never get from a workplace. Where else can you go and have a meeting of the minds all in single place, or even all in single major? It’s harder to do in the workplace where everything is so task-oriented, there often is little room for more stimulating interaction, and sometimes, the environment is completely stifling.

kgotthardt, at 11:35 am EDT on September 13, 2007

I am sorry that kgotthart seems to be teaching his/her students that living standards in America have not been improving. That should be evidence alone of negative spillover effects from sending students to higher education. You don’t need statistical tricks to demonstrate how overwhelmingly better our standard of living has become, even in the past 20 years. But, you actually do need to play statistical tricks to convince people that incomes have not been going up. You never addressed my point about non-wage benefits ... why do they get counted up when discussing how important higher education is, but then are completely dismissed in a discussion of the quality of life in America? You did it yourself in that post. And, even if you look only at average or median income over time, that tells us nothing about how a typical family’s lot has changed over time. The people you are measuring in 1970 or 80 or 90 or 2000 for that matter, are not the same as those around today. Even if they were, there is no easy way to understand how prices and costs have increased over time.

To take a benign example, even a simple iPod today costs about the same as it did 3 years ago. But it holds 8 times as many songs, the battery lasts longer, the unit is more durable and it plays videos. Despite the best efforts of our government statisticians, they simply are unable to deal with such quality improvements across the mass of goods and services we consume, so measuring price changes is extremely difficult.

And, remind me again why it is so important for higher education institutions to convince students that voting is sacrosanct? People vote for stupid policies, including college educated people. A quick look at the General Social Survey will show that college educated students are horribly protectionist, they vastly misunderstand how our government spends its money, they have great sympathy for “make work” projects, and on and on. It’s amazing we don’t get worse outcomes than we already do.

It just is too knee-jerk to object to any questioning of the public value of a college education. You think college going reduces petty crime? Sure, it does. But when I was trained in physics, I learned how to do some really awful things — I am a potentially more competent criminal now. You think college is a unique place for people to exchange ideas? Then I don’t understand how what you think the internet / blogosphere does? You think college faculty members and their students actually exchange ideas and learn to think together? Didn’t happen where I taught.

No doubt college is important for individuals — particularly if they take advantage of the immense resources that are available. But I take umbrage at the inability of those who have a stake in the higher education sector to question it in any way. And I am one of those people.

Mike, at 2:25 pm EDT on September 13, 2007

truth in (self) reporting

Causes are often and easily incorrectly assumed. Because college graduates rate themselves as healthy and active, college taught them (via exposure to gyms) to be active — or because a student is healthy and active he/she is drawn to attend college where use of the gym is free. The same holds true for the volunteerism correlation – college grads become more intellectually curious and therefore volunteer more – or because college grads are by nature more intellectually curious they went to college – and perhaps continue with volunteerism initiated at a younger age. Correlation is indeed the better word choice. Maybe college grads are better at self deception – they aren’t really healthy and active nor do they really volunteer more.

GMS Community College Faculty, Faculty at Cochise College, at 4:15 pm EDT on September 13, 2007

Distraction

This seem to be little more than a feeble attempt to create distraction from the failure to prepare students adequately for their careers. Instead, we get half-baked unmeasurable criteria and a report that says that everything is ok (except for that nagging problem with the whole career preparation thing, but some more tolerance training will surely clear that up).

Kevin, Undergraduate, at 5:55 am EDT on September 15, 2007

Intellectual Nationalism

The studies reported here seem to be based on US data, with no regard to how well the conclusions generalize and apply to the other 95% of the individuals alive worldwide today.

It is only in the USA and other English-speaking countries that quasi-universal access to higher education is treated as something akin to a human right. In Continental Europe and East Asia, only the top 1/3 or so of school pupils are granted entry to into universities. The other 2/3 are shut out.

In order to test these studies’ conclusions, one would have to compare diet, exercise, and voting among French, Germans, Japanese, etc.

A cursory glance at the anecdotal evidence suggests exactly the opposite conclusion.

The USA has notoriously low voter turnout rates, as contrasted with other industrialized nations. Obesity is a much bigger problem in Australia, Great Brittain, and the USA than it is in Argentina, Japan, and Sweden, e.g.

If one wanted to conflate correlation with causation, then the more ‘logical’ conclusion — note the irony, before you flame me, please — would be that quasi-universal access to higher education causes obesity, low voter turnouts, and an unwillingness to learn foreign languages.

Charles Evans, Executive Director at Free Curricula Center, at 4:15 pm EDT on September 16, 2007

explanations and comparisons

If you’re looking for a comparative approach to this issue , we at OECD have just published a study on Understanding the Social Outcomes of Learning, where we try to get to grips with causality, and explore the mechanisms through which education affects health and civic engagement. OECD has 30 member countries, including the US. You can also access for free a symposium on the issue, at www.oecd.org/edu/socialoutcomes/symposium

Tom Schuller, Centre for Educational Research and Innovation, OECD, at 7:15 am EDT on September 20, 2007

a response to the ipod analogy

“To take a benign example, even a simple iPod today costs about the same as it did 3 years ago. But it holds 8 times as many songs, the battery lasts longer, the unit is more durable and it plays videos”

With all due respect to your argument, I wouldn’t consider using this analogy to support it. Apple is notorious for over pricing their products. The fact Apple’s later generation Ipods cost the same but have more features is a consequence of Apple’s immoral pricing schemes. If you don’t believe me, then just take into consideration the recent reduction of the Iphone from 600 to 400 dollars. Anyone that was familar with the technology knew it was overpriced at 600 by an immoral 200 dollars.

john, at 11:55 am EDT on October 5, 2007

iPhone pricing ??!

How can the price of an iPhone be immoral? It is a consumer item priced at the value where supply and demand intersect and the seller can change the price to respond to or affect demand. This is capitalism 101. If we were talking about a life saving medicine, then maybe morality comes into play for the pricing, but not for a consumer device like an iPhone. What the heck does an iPhone price have to do with the value of a college degree anyway?

MikeB, at 8:25 pm EDT on October 14, 2007

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