When it Comes to Earnings, Higher Education Isn't the Whole Story

August 04, 2011

How much money people make has a lot to do with how educated they are, but sometimes less-educated people earn more.

This spring, Georgetown University's Center on Education and the Workforce injected some nuance into the debate over what a college degree is worth when it released a report showing how what people study in college affects their earnings. That report, based on the center's analysis of a trove of new data from the U.S. Census Bureau, compared workers whose highest degree was a bachelor's. Now the center is following up with a new report that works to untangle the relationship between earnings and education more broadly.

The new report, "The College Payoff: Education, Occupation, Lifetime Earnings," released Thursday, is also based on data from the bureau's American Community Survey. In this case, the researchers calculated a lifetime-earnings figure for full-time, full-year workers with various levels of education, from less than high school to doctoral and professional degrees. Unsurprisingly, they found that median lifetime earnings rise with education level: The typical worker with less than a high-school diploma earns $973,000 over a career, in 2009 dollars, while a worker with a professional degree (mainly in law or medicine) earns $3.6-million.

But that is not the whole story. "There was a time when the differences by education level were really much more powerful," says Anthony P. Carnevale, director of the center and lead author of the report. Education level still matters. But what really intrigued the researchers was the diversity of experiences underneath that general pattern.

For example, while the median lifetime earnings of bachelor's degree holders (about $2.3-million) are higher than those of associate-degree holders (about $1.7-million), 28.2 percent of those whose highest degree is an associate earn as much as or more than does the typical bachelor's holder (see interactive chart).

That diversity is largely the result of differences in earnings among occupations. Within each occupation, like health professionals or sales and office workers, the more education a person has, the more that person is likely to earn. But some occupations pay better than others, so less-educated workers in them can earn more than more-educated workers in a different line of work. That finding echoes the center's report on college majors, since college major is closely tied to occupation.

The overlap between earnings at different educational levels varies quite a bit. Only 1.3 percent of workers with less than a high-school degree earn as much as or more than does the typical worker with a professional degree, while 41.9 percent of those with some college but no degree earn the same as or more than what the typical associate-degree holder makes.

"What you take away from this and the majors report, in both cases, is the devil is really in the detail," Mr. Carnevale says. A program of study should let prospective students know what fields its graduates work in, and how much they make, he says. An academic program "ought to be able to tell people where this takes you, other than where it takes you intellectually."

That is not to say that the purpose of college is "to make foot-soldiers for capitalism," Mr. Carnevale says. Still, he says, education has little purpose if it does not lead to a job, since in our society, "if you can't get a job, you're not really a citizen."

Like the study on college majors, this new research also reveals earnings gaps for women and minorities. The report refers to gender and race as "wild cards that matter more than education or occupation in determining earnings."

Women earn less money than men over a lifetime at every level of education. At the median, a man with some college but no degree earns nearly as much as a woman with a bachelor's degree, and a woman must hold a Ph.D. or professional degree to surpass what a man makes with a bachelor's.

White workers earn more than African-American and Latino workers at every level of education. Asian workers, in contrast, make more money than white workers at the three graduate levels: master's, Ph.D., and professional degrees.

The report also includes lists of the 10 most common occupations for workers with each level of education and their median lifetime earnings, which help illuminate the occupation-based variation within education levels.