Benefits of Higher Education: Graduate Salaries and More

Jane Playdon, QS education writer

A new report from the College Board, ‘Education Pays 2013: The Benefits of Higher Education for Individuals and Society’, highlights both the monetary benefits of higher education, and also lesser known benefits – including a healthier lifestyle and reduced risk of obesity.

As a rejoinder to the ongoing debate about whether higher education is suitable for everybody, the report includes substantial evidence of the benefits, plus a supplement called ‘How College Shapes Lives: Understanding the Issues’. The latter explains the analysis and aims to show that “disappointing outcomes for some [students]” are not inconsistent with “the reality of significant benefits for most students”. Overall, the report argues that “on average and for most people postsecondary education has a high payoff”.

The report is based on US data, and as the supplement explains, uses the term “college” to refer to any postsecondary institution, including vocational training as well as academic degrees.

Graduate salaries and employability

The most-measured benefit of higher education is of course graduate salaries, and the report confirms that higher levels of education do result in higher earning power. It cites research by Greenstone and Looney (2011) of the Brookings Institution’s Hamilton Project, which says: “On average, the benefits of a four-year college degree are equivalent to an investment that returns 15.2% per year.”

The monetary benefits of higher education can be seen in the lifetime difference of 65% earning power when comparing graduate salaries and the earnings of those with just high school education. Median earnings of individuals with a bachelor’s degree in 2011 (latest available data) were on average US$21,100 higher than those with a high school degree.

This earnings gap increases with higher levels of degree, and also with age. The gap between those with a bachelor’s degree and those with a high school education increases from 54% for 25 to 29-year-olds to 86% for 45 to 49-year-olds.

The benefits of higher education also extend to the chances of being employed in the first place.  Unemployment rates for four-year college graduates in the US fell from 4.7% in 2010 to 4.0% in 2012, while for high school graduates the equivalent figures were 10.3% in 2010 and 8.3% in 2012.

Contributions to society

The report also argues that the benefits of higher education incorporate significant contributions to society, with higher educated workers typically paying more tax.

Higher levels of education are also found to correlate with higher health insurance and pension contributions. The report argues that this in turn benefits the US economy, by preventing hospitals from providing treatment for which they are not compensated. In 2011, employers provided health insurance for 55%, 69% and 73% of full-time workers with high school diplomas, bachelor’s degrees and advanced degrees respectively.

Bachelor’s degree holders are also less likely to rely on public assistance programs, according to 2011 figures which show only 2% living in households that rely on Supplemental Nutritional Assistance Program (SNAP) benefits, compared with 12% of high school graduates.

Other benefits of higher education

Beyond graduate salaries and employment prospects, the report is also keen to highlight some of the lesser reported benefits of higher education. Apparently those with a college education are more likely to live healthier lifestyles, with fewer incidences of smoking and obesity. The gap between smoking rates of those with high school diplomas and those with four-year degrees has risen from 2 percentage points in 1962 to 17 points in 2012.

College-educated adults of all ages, and their children, are also less likely to be obese. In addition, mothers with higher levels of education spend more time with their children, regardless of whether they are employed or not.

Additional nonpecuniary benefits of higher education include psychological benefits derived from “the material well-being of individuals and the wealth of society”, and the increased likelihood of engaging in voluntary work and understanding political issues. And in terms of job satisfaction, 56% of workers aged 30 to 45 agree that their job keeps them learning, opposed to just over 30% with a high school diploma.

On average, the more you learn the more you earn

In short, the main thrust of the report is to provide reassurance that spending time and money on higher levels of education is likely to pay off – both in monetary terms and beyond. Its argument is summarized: “The evidence is clear that some form of postsecondary education is a necessary element of successful, independent lives for most people in today’s economy.”

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