By Bill DeBaun, Director of Data and Evaluation
The relationship between education and wages is a timeless economic question for which we have a robust research base whose consensus is that more education leads to higher wages. One area where there is relatively less evidence is for the connection between wages and sub-baccalaureate degrees and certificates. Clive Belfield and Thomas Bailey, on behalf of the Center for Analysis of Postsecondary Education and Employment (CAPSEE), are out with a new working paper that finds evidence of earnings increases for completers of both associate’s degrees and certificates. These results are heterogeneous (read: they vary) according to state and field of study, and suggest that earnings increases persist even despite broader economic conditions.
Across studies from eight states (Arkansas, California, Kentucky, Michigan, North Carolina, Ohio, Virginia, and Washington), the average quarterly earnings increase attributable to completing an associate’s degree -- compared to enrolling but not completing -- was $1,160 ($4,640 annually) for men, and $1,790 ($7,160) for women. For certificate earners, the quarterly increase was $530 or $2,120 annually for men and $740 or $2,960 annually for women.
Past research around education and earnings has relied on large national data sources like the Current Population or American Community Surveys or from longitudinal studies like the National Longitudinal Survey of Youth. The research CAPSEE relied on “makes use of large state datasets that include student transcripts merged with individual quarterly earnings records,” which is beneficial because this includes program- and pathway-specific data as well as information on certificate and associate program length and credit accumulation.
Also notable about this research is that it differs in methodology from past studies. When researchers examine the connection between education and wages, they tend to use descriptive data that breaks out average wages by level of education. The challenge here is that just using these descriptive data muddles the effect of an individual’s characteristics versus a program’s characteristics or effect (i.e., is any change in wage a result of the person or the program or some of both?). The studies examined control for both “measurable personal characteristics of students” and, in most cases, “fixed characteristics of individuals, whether or not those characteristics can be measured.”
The studies examined in the working paper use three types of dataset:
- State-level information on “all first-time-in-college, credit-seeking students within a state community college system across some years in the early to mid-2000s” with “transcript information, including credits accumulated, award receipt, and field of study, as well as basic personal information (e.g., age, gender, race/ethnicity), and financial aid received (loans and grants per semester)” but generally without high school performance data
- Student-level data from the National Student Clearinghouse (NSC) featuring “information on institutions attended, enrollment durations, awards obtained, and field of study at each institution subsequent to enrollment within the initial system”
- “Individual quarterly earnings data obtained from Unemployment Insurance (UI) records. These data are typically available for the period before, during, and after enrollment in college.”
These studies found that “the returns to associate degrees are strongly positive and statistically significant across each state” and that these increases “persist over time” post-college completion. The returns to certificates were “positive but modest.” There is less of a consensus around certificates, given that some of the studies found negative earnings returns or returns that were not distinguishable from zero. Some studies found that the earnings benefit was not persistent after students received the certificate.
The authors note that the variability among certificate types is high, and consequently, “the returns to certificates must be interpreted carefully.” This is for a few reasons. Because certificates are often tied to specific jobs, they are prone to be affected by “fluctuations across industries and occupations.” Additionally, certificates themselves are not homogeneous (e.g., length for completion varies).
Beyond just completion, the studies show that even for non-completing students, wages increased as students earned more credits. For example, a study of North Carolina found that each credit accumulated by community college students increased quarterly earnings by an average of $17 for men and $29 for women.
Although the studies generally find wage increases as a result of obtaining an associate’s or certificate, they also “have identified significant differences in earnings gains according to the field of study.” Across all of the states, associate’s degrees in health-related fields yielded the largest earnings gains. “Quantitative or technical-vocational courses” also saw higher gains than those in “humanities, social sciences, or other academic disciplines.” Notably, these gains varied across states, and specific fields of study were not universally the highest gainers in each state.
The authors conclude: “As the consensus indicates that further investments in sub-baccalaureate college are valuable for students, an important issue is why completion rates at two-year colleges are so low. A key policy issue is identifying the constraints that hinder students’ completion of college programs and thus their ability to secure higher paying jobs.”
This research adds to the body of education-wage literature, which previously found that “looking across nine studies published since 2005, the lifetime present-value earnings gain from a four-year college degree amounts to $423,800” and that “across 17 studies, the average earnings premium for an associate degree compared with a high school diploma was 13 (21) percent for men (women); and, although there were only two available studies on “shorter” credentials, earnings gains from certificates were also identifiable.”