On Monday, the Federal Reserve Bank of San Francisco released a report seeking to answer an important question: “Is It Still Worth Going to College?”
The FRBSF Economic Letter asserts that despite rising costs of attendance, a weakening job market that values specific skillsets as a primary consideration for employment and an increased call for newly-graduated high school students to pursue two-year degrees or vocational training, a four-year degree is still a worthwhile investment.
After accounting for the four years of income lost to undertaking and completing an undergraduate degree and after considering the high cost of tuition, the regional Fed bank estimates that the average college graduate in the United States will earn over $800,000 more than the average high school graduate over a lifetime.
“Although there are stories of people who skipped college and achieved financial success, for most Americans the path to higher future earnings involves a four-year college degree. We show that the value of a college degree remains high, and the average college graduate can recover the costs of attending in less than 20 years,” wrote Mary C. Daly and Leila Bengali. “Once the investment is paid for, it continues to pay dividends through the rest of the worker’s life, leaving college graduates with substantially higher lifetime earnings than their peers with a high school degree.”
For a college student that pays $21,200 or less per year in college tuition — as 90 percent of all public university students and 20 percent of private university students do — the researchers found that a college graduate will earn $831,000 more, on average, than someone who entered the workforce directly from high school.
While this can be interpreted correctly as an endorsement for college, the letter also clearly points out a growing problem in the United States. According to data issued by the U.S. Census Bureau in September, from 1991 to 2012 the percentage of the national aggregate income dropped for households in which the primary earner has attended some college, obtained only a high school diploma or did not complete a high school education. The portion of income from households with a primary earner with a bachelor’s degree, however, increased from 37 percent to nearly 50 percent during the same period.
This means that one out of every two dollars goes to the 28.9 percent of American adults with a four-year degree or higher. Considering that only 19 percent of all black adults and 13.1 percent of all Hispanic adults have bachelor’s degrees, entire socioeconomic groups are being asked to survive with an ever-shrinking share of total national household income.
While college enrollment levels have been on the upswing for white women, blacks and Latinos, spiking college costs remain a barrier to enrollment for low-income students, who are forced to rely on a shrinking pool of scholarships and government grants to pay for college or absorb massive amounts of debt.
Additionally, the lack of community and development resources available to those in the lowest income levels make higher educational attainment an uphill battle. While seven in 10 students in the highest income quartile had parents with four-year degrees, this was true of only one in 10 in the lowest quartile. These factors can lead low-income students to believe that educational attainment is impossible, undesirable or not essential.
Those who opt to enter the workforce immediately after high school typically find themselves lacking in the critical scientific, technical, engineering and mathematics (STEM) skills needed for higher-paying jobs, further perpetuating the recurring cycle of poverty or near-poverty. This is happening at the same time that many employers are facing shortfalls in STEM-trained employees.
At the end of last year, the unemployment rate for those with less than a high school diploma stood at 11 percent, compared to 7.5 percent among those with a high school diploma and 4 percent for those with a bachelor’s degree. This shows a clear need a need for creating an affordable path to educational attainment and establishing a means toward offering free or affordable STEM training that could close the growing attainment gap.
“Think about jobs 15 years ago that didn’t need any college education,” Sandy Baum, a senior fellow at the George Washington University Graduate School of Education, told The New York Times last year. “Maybe you don’t need a bachelor’s to change bedpans, but today if you’re an auto mechanic, you really have to understand computers and other technical things.”