The Returns to Education and Degrees (2003)

Differences in earning ability and returns to the associate's and bachelor's degrees are analyzed for the National Longitudinal Survey of Youth. The average age of the sample is 27. Each additional year of education past high school yields an economic return of 1.9%. Only bachelor's degree recipients enjoy an economic advantage on completion of the degree (10%); associate and vocational degree holders do not significantly benefit from a sheepskin effect. Besides years of education and the bachelor's degree, being white, male, older, having more work experience, living outside the South, being in an SMSA, married, and having the bachelor's degree as an educational goal are all positively associated with higher wages. The number of community colleges in the United States rapidly increased between the years 1960-1980. For example, in 1963, there were only 634 two-year colleges. By 1980, this figure increased to 1,190 (an 88% increase). By 1980, there were twice as many public two-year colleges in the United States as four-year colleges and institutions. As of 1995, this trend continues. Currently, we have 1,284 public two years institutions and 629 public four-year institutions (Digest of Educational Statistics 1996). Along with the rise in the number of institutions was an increase in the number of students attending two-year colleges. In the early 1960s, few (844,512) students were enrolled in two-year colleges. By 1985, 4,270,000 students were enrolled in these institutions. Enrollment in two-year colleges doubled between the years 1970 and 1985, a change of 112 percent, while enrollment in four-year colleges increased by only 21 percent. Today, almost half of all students enrolled in higher education are in community not four-year colleges (Digest of Educational Statistics 1996). Many researchers have analyzed the relationship between educational experience and labor market outcomes. Generally this research shows that the number of years of education an individual acquires is a significant determinant of income all else equal (Mincer 1974; Sewel & Hauser 1975). It is well known that acquiring the bachelor's degree enhances adult earning ability (Mincer, J. 1974; Sewell, W.H. and R.M. Hauser 1975). Studies have shown, though, that having part of a four-year college education is of limited economic value (Monk-Turner 1983; Breneman & Nelson 1981; Anderson 1984). Given the increase in the number of and enrollment in community colleges, it is important to analyze economic rates of return by both years of education achieved and by type of degree earned. Few researchers take into account between-school differences in analyzing variation in earning ability (see Alwin 1974; Kane and Rouse 1993; Jaeger & Page 1996). To date, research results on economic returns to community and four-year educational investments are mixed. For example, Kane and Rouse (1993) maintain that two-year and four-year college credits are worth roughly the same as regards economic returns. They go on to argue that the economic value of having the bachelor's degree is of small relevance compared to the number of credits completed. Alternatively, Jaeger & Page (1996) write that sheepskin effects hold, however, they do not find significant differences in economic returns to the bachelor's degree by race or gender. They do find that white women who complete the associate's degree benefit more than do comparable men. In this article, we analyze economic returns to education, by years of education completed and type of degree attained, for a sample of women and men early in the life cycle. According to human capital theory, the breakeven point in analyzing variation in income between college graduates and high school graduates is about age 25. Age earning profiles show that the earnings of college graduates are higher than the earnings of high school graduates. The peak earning period for college graduates is late in their fifties; the peak earning period for high school graduates is early in their forties (Cohn 1979). …