THE EARNINGS EFFECT OF EDUCATION AT COMMUNITY COLLEGES

I. INTRODUCTION Since the early 1980s, the earnings of workers with a postsecondary education have grown substantially, relative to those of their high school educated peers (Autor, Katz, and Kearney, 2005). Economists explain the bulk of this increase in relative earnings as the result of shifts in the structure of demand in the labor market that have favored workers with more skill (e.g., Levy and Murnane, 1992; Bound and Johnson, 1992; Autor, Katz, and Kearney, 2005). This explanation resonates with industry groups and policy makers, whose response has been to demand accountability in secondary education and to encourage high school students (and workers looking to retool) to attend college. While they receive relatively little attention, community colleges are one potentially important set of institutions providing access to post-secondary education, among both recent high school graduates, and older workers attempting to upgrade their skills. (1) Nearly 40% of all students enrolled in postsecondary education are at 2-yr institutions. (2) Furthermore, enrollment at 2-yr institutions has grown relative to enrollment at 4-yr institutions: In 1970, about 27% of all students enrolled in postsecondary education were at 2-yr institutions. (3) Beyond the secular trend in growing enrollment in 2-yr colleges, the recent economic downturn has been cited as an important factor behind large increases in enrollment in community colleges across the country. Because of open enrollment policies, low tuition, and their applied courses, community colleges can be relatively attractive during difficult economic times for adults looking to upgrade skills and traditional college students facing financial hardship. While national data on enrollments subsequent to the deteriorating economic conditions in late 2008 are not yet available, there is ample evidence of large increases in enrollment from 2-yr colleges across the country. (4) As enrollment has continued to grow, we have come to learn more about the earnings effect of education at community colleges. But, like policy makers, researchers have focused less on enrollment at these institutions than on enrollment at 4-yr colleges and universities. So, while some work has been done to understand the effect of community colleges on employment and earnings of students, we have much to learn about the role of community colleges in shaping the economic futures of students. Improving our understanding of the economic returns to community college education is important for several reasons. First, community colleges provide educational opportunities to students who are typically economically disadvantaged, and whose academic preparation is typically not as strong. These are the students most at risk of being left behind by ongoing changes in the labor market. Second, community colleges are a principal mechanism for upgrading skills of those already in the workforce because of their open admissions policies and flexible courses of study, which include degree programs, certificates, and nondegree courses. Finally, as others have argued, community college enrollment is likely to be particularly amenable to policy intervention because they enroll a larger share of students affected by state and federal financial aid (Rouse, 1994). In this paper, I make use of data from the 2000 follow-up of the National Education Longitudinal Survey (NELS) to extend what is known about the value of education at community colleges. I examine the effects of enrollment in community colleges on students' subsequent earnings. My first objective is to estimate the earnings effects of varying levels of credits earned in community colleges, separately from any credentials earned while enrolled. I do so because community colleges are often used as a means for students to engage in study not necessarily leading to a degree or certificate. My second objective is to examine whether credits earned in courses that are principally occupational or vocational provide a different return than credit hours earned in academic courses. …