Investment in Graduate and Professional Degree Education: Evidence of State Workforce Productivity Growth.

Introduction Investment in higher education yields both private and public benefits (Cohn and Geske, 1990; Leslie and Brinkman, 1988; Paulsen, 2001b, 2001c; Pascarella and Terenzini, 1991; Pencavel, 1993; Schultz, 1963; Solmon and Fagnano, 1995). An example of a private benefit would be the substantial additional earnings that accrue to a college graduate compared to a high school graduate (G. Becker, 1992; College Board, 2006; Fossey, 1998; Murphy and Welch, 1989; Paulsen, 1998, 2001b), while an example of a public benefit--also known as a social or external benefit--would be an increase in overall productivity of a state's workforce that results in additions to everyone's income rather than only the income of the individuals investing in higher education (Baumol, Blackman and Wolff, 1989; Leslie and Brinkman, 1988; Paulsen, 1996a, 1996b, 2001c; Pencavel, 1993). Existing data show that earnings for graduate and professional degree holders are higher than those of bachelor's degree holders. A report from the U.S. Census Bureau shows that over the course of their working lives, adults are likely to have higher earnings as they become more educated (U.S. Census Bureau, 2002). While high school dropouts have the lowest expected lifetime earnings compared, professional and doctoral degree holders have the highest. Data from the Bureau of Labor Statistics (2005) reveal that while the median weekly earnings for bachelor's degree holders is $916, the median weekly earnings for masters, professional and doctoral degree holders are $1102, $1377, and $1398 respectively. Existing literature also demonstrate that private returns due to the investments in graduate and professional education have always been positive (Lindsay, 1973; McMahon & Wagner, 1981, 1982; Sloan, 1970). While returns to graduate degree education were found to vary, returns to the investments in professional degree education were found to be highly profitable (Lindsay, 1973; Sloan, 1970). Problem Statement Over the past thirty years, graduate and first-professional enrollments in degree-granting institutions have increased considerably. According to NCES (2006) data, between 1976 and 2004, enrollment in graduate programs increased 62 percent (from 1.3 to 2.2 million), while enrollment in professional programs increased 37 percent (from 244,000 to 335,000). Enrollments in both graduate and first-professional programs are projected to continue increasing, with graduate enrollment expected to reach 2.6 million and first-professional enrollment to reach 437,000 by 2015 (NCES, 2006). Accordingly, degree attainments in graduate programs and professional degree programs have increased substantially. According to the Digest of Education (2005), in the 1976-77 academic year, 316,602 students were awarded master's degrees while 33,126 students were awarded doctoral degrees and 63,953 students were awarded professional degrees by degree-granting institutions. In the 2003-04 academic year, these numbers increased to 329,395, 23,055, and 40,872 respectively. Despite the increased number of graduate and professional students enrolled in the institutions of higher education in the United States, it is very surprising that there has not been much research done to explore the issue of investing in higher education at the graduate and professional degree levels. A number of taxonomies and reports of empirical evidence of the public or social benefits-both tangible and intangible--of investment in higher education have appeared in the literature (Baum & Payea, 2004; Bowen, 1977; Cohn & Geske, 1990; College Board, 2005; Institute for Higher Education Policy, 1998, 2005; Pascarella & Terenzini, 1991; Perna, 2005; Solmon & Fagnano, 1995; Wolfe, 1995) and a number of studies have provided evidence of public benefits in terms of computed social rates of return (McMahon, 1991; McMahon & Wagner, 1982), estimates of economic impact, and estimates of the contribution of higher education to economic growth (Fatima & Paulsen, 2004; Leslie & Brinkman, 1988; Paulsen &Fatima, 2007). …