A Review of the literature on the economics benefits of education: 2-year and 4-year

1. A Review of the literature on the economics benefits of education: 2-year and 4-year BUSN 502 Drexel University

2. Abstract June 3, 2010 • Few can argue against the importance of a college education. • Despite ever increasing costs, enrollments are at an all-time high. • ~11.5 million students [39% of 18-24 YO] are enrolled in 2- or 4-year. • While the benefits are plentiful, it is unclear just how much education is needed to improve the economic well being of the adult population.

3. Premise …an educated person not only realizes individual returns, but also contributes to the greater good of society… Increased demand Benefits are plentiful Opportunity cost Economic value for human beings based on perceived productivity Theory of human capital • Society can increase its national output • An individual can increase income Education increases human capital

4. Kane and rouse (1995; 1997)

5. Key Points Findings • For every year of credits completed (30 completed credits over two semesters), the average 2- and 4-year college student earns ~5% more than similar high school graduates. • Those who attended a 2-year earned ~10% more than those w/o any college. • Payoff of “some college” was 7.6 nationally (8% in Ca.) • Associate degree= 15-27% National Longitudinal Study of the High School Class of 1972 Used transcript data and National Longitudinal Survey of Youth Prior research relied on Bureau of Census data (years of school completed but not differentiated by 2- and 4-year)

6. Jaeger and Page (1996)

7. Key Points Findings 1991 and 1992 Current Population Survey Matched 1991 data on years of education with 1992 data on degree completion Similar years of school completed, but no degrees: • White men with Associate degrees earn 8-19% more • White women with Associate degrees earn 24-31% more Conclude that sheepskin effects do matter in the returns to eduction.

8. Leigh and Gill (1997)

9. Key Point The payoff to “some college” applies to both continuing high school graduates and experienced adult workers who return to school after acquiring considerable labor market experience.

10. Marcotte et al (2005)

11. Key Points Findings 1990 NELS provides information on a nationally representative sample of students who were in 8th grade in 1988. 2/3 of the cohort enrolled in some form of postsecondary education after high school; however, only 33.3% earn a 2- or 4-year degree. • Those enrolled in postsecondary education were more likely to be employed full-time and earn higher wages. • Those with no college enrollment earned less. • Those that enrolled in a 4-year earned more. • Economic outcomes were higher for those with degrees.

13. Research over the past two decades has brought to the light the importance of education beyond high school. In particular, evidence has grown to substantiate the economic returns for workers with higher education levels. This review suggests that community colleges are associated with higher wages, even for those not completing degrees. While no assertions have been made with regard to the causation of higher levels of earnings, the evidence is compelling on the powerful impact of education on individuals and on society. In sum, education does pay.

14. References California Postsecondary Education Commission. (2010). Ready or not, here they come: the complete series of undergraduate enrollment demand and capacity projections, 2009-2019. Sacramento, Ca: California Postsecondary Education Commission. College Board. (2005). Education pays 2004: the benefits of higher education for individuals and society. Washington, D.C.: College Entrance Examination Board. Fry, R. (2009). College Enrollment Hits All-Time High, Fueled by Community College Surge. Pew Research Center. Retrieved from http://pewresearch.org/pubs/1391/college-enrollment-all-time-high-community-college-surge Grubb, W. N. (2002). Learning and earning in the middle, part I: national studies of pre-baccalaureate education. Economics of Education Review, 21, 299-321. Jaeger, D. and Page, M. (1996). Degrees matter: new evidence on sheepskin effect in the returns to education. TheReview of Economics and Statistics, 78(4), 733-740. Kane, T. and Rouse, C. (1999). The community college: educating students at the margin between college and work. The Journal of Economic Perspectives, 13(1), 63-84. Kane, T. and Rouse, C. (1995). Labor market returns to two- and four-year colleges. American Economic Review 85, 600-614. Leigh, D. and Gill, A. (1997). Labor market returns to community colleges: evidence for returning adults. Journal of Human Resources, 32(2), 334-353. Levin, H. (1989). Mapping the economics of education, an introductory essay. Educational Researcher, 18(13), 13-16, 73. Long, B. (2007). The contributions of economics to the study of college access and success. Teachers College Record. Retrieved from http://www.tcrecord.org/PrintContent.asp?ContentID=12582 Mankiw, N.G. (2009). Essentials of Economics, 5th Edition. Mason, OH: South-Western Cengage Learning. Marcotte, D., Bailey, T., Borkoski, C., and Kienzi, G. (2005). The returns of a community college education: evidence from the national education longitudinal survey. Educational Evaluation and Policy Analysis, 27(2), 157-175.