Historically, Education has paid off.
Over the past 25 years, earnings differences have grown among workers with different levels of educational attainment. As Figure 2 shows, in 1975, full-time, year-round workers with a bachelor’s degree had 1.5 times the annual earnings of workers with only a high school diploma. By 1999, this ratio had risen to 1.8. Workers with an advanced degree, who earned 1.8 times the earnings of highschool graduates in 1975, averaged 2.6 times the earnings of workers with a high school diploma in 1999. During the same period, the relative earnings of the least educated workers fell. While in 1975, full-time, year-round workers without a high school diploma earned 0.9 times the earnings of workers with a high school diploma; by 1999, they were earning only 0.7 times the average earnings of high school graduates.
The historical change in relative earnings by educational attainment may be explained by both the supply of labor and the demand for skilled workers. In the 1970s, the premiums paid to college graduates dropped because of an increase in their numbers, which kept the relative earnings range among the educational attainment levels rather narrow. Recently, however, technological changes favoring more skilled (and educated) workers have tended to increase earnings among working adults with higher educational attainment, while, simultaneously, the decline of labor unions and a decline in the minimum wage in constant dollars have contributed to a relative drop in the wages of less educated workers.
Earnings increase with education level
Adults ages 25 to 64 who worked at any time during the study period 5 earned an average of $34,700 per year.6 Average earnings ranged from $18,900 for high school dropouts to $25,900 for high school graduates, $45,400 for college graduates, and $99,300 for workers with professional degrees (M.D., J.D., D.D.S., or D.V.M.). As shown in Figure 1, with the exception of workers with professional degrees who have the highest average earnings, each successively higher education level is associated with an increase in earnings.
Earnings differences by educational attainment compound over one’s lifetime.
Synthetic estimates of work-life earnings dramatically illustrate the differences that develop between workers of different educational levels over the course of their working lives.
As shown in Figure 3, for full-time, year-round workers, the 40-year synthetic earnings estimates are about $1.0 million (in 1999 dollars) for high school dropouts, while completing high school would increase earnings by another college, and nearly twice as much as workers with only a high school diploma. A master’s degree holder tops a bachelor’s degree holder at $2.5 million. Doctoral ($3.4 million) and professional degree holders ($4.4 million) do even better.