Thursday, April 24, 2014

Comparing a Decade of Income Gains by Education Level

We all know that, as a general rule, the more education an occupation requires, the better it pays. It is also commonly understood that the advantage of a college degree has been growing. This has been demonstrated by surveys that ask people—especially recent graduates—about their education and about their earnings. But how do income gains compare across different levels of education when you look at the issue not through surveys of individuals but rather through groups of occupations?

To answer this question, I looked at the income medians reported for occupations by the Occupational Employment Statistics (OES) program. I grouped the occupations by level of education required as specified by the Department of Labor. Then I computed a weighted average for each level; in a weighted average, the occupations with larger workforce size count for more in the average. I did this for two years: 2002 and 2012.

Here’s what I found:

Education Level
Average for
Average for
High School
Vocational Training
Associate Degree
Bachelor's Degree
Master's Degree
Doctoral/Professional Degree
 $ 81,022

I’ll admit that I was surprised by some of these results.

One surprise was the low payoff for master’s-level occupations—a weighted average of $65,532 in 2012, which is lower than the average for bachelor’s-level occupations. Understand that the set of master’s-level occupations includes many workers who are low-paid considering their required degree. For example, out of 2,197,830 workers, it includes 104,070 Rehabilitation Counselors, with a median income of $33,880; 115,080 Mental Health Counselors ($40,080); and 99,680 Community and Social Service Specialists, All Other ($41,060).

These average figures (both for 2002 and 2012) for master’s-level occupations defy the general trend that the more education you have, the better you’re paid. These figures also contradict the chart created by the Department of Labor showing median weekly earnings of individuals at various education levels, in which people with a bachelor’s average $1,108 per week and those with a master’s average $1,329. (The figures apply to 2013, but you would not expect much difference from 2012 data.) I think the reason might be because the Rehabilitation Counselors and other master’s-level workers with comparatively low annual earnings are more likely to work part-time, and therefore their advantage in weekly earnings would not be reflected in their annual earnings.

Something similar is probably at work in the ho-hum gain (32 percent) for occupations that require a doctoral or professional degree. A large number of these workers are college faculty, and the current trend on campuses is toward greater and greater use of adjunct—that is, part-time—instructors.

The other surprise was in the percentage gains in income. We’ve all heard that wages have remained flat for workers with low education levels, yet the weighted average of high school–level occupations show the biggest gains between 2002 and 2012, and the bachelor’s-level occupations show the second-lowest gains. I think that the reason we find bigger gains for the bachelor’s degree in studies like that done by the College Board is that those studies look at comparatively recent recipients of the degree, whereas the figures I used are based on all incumbents in the occupation. The set of all incumbents includes many workers who have been in the occupation for 20 or 30 years; some of these may have more or less education than the degree that is now recommended for the occupation.

Therefore, young people planning their education should not base their decision on my analysis here. What I show here are trends based on sets of workers that include only small numbers of recent graduates.

Another consideration to bear in mind is that my figures apply only to workers who are employed. They do not reflect the large losses of income experienced by workers in high school–level occupations who became unemployed, as so many did, especially as a result of the recent Great Recession. The large gain 2002–2012 for the high school–level occupations may in fact reflect a kind of Darwinian selection: Workers in these occupations who remained employed despite the Great Recession are probably the ones with the highest levels of skill.

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