Education-and-State-Economic-Strength:-A-Snapshot-of-Current-Data





The emergence of a knowledge-based economy over the past
several
decades has led to a widening gap between workers with
bachelor’s degrees and those without. As we discuss below,
the greatest increases in wages over the past four decades, and in the
relative earnings benefit of attending college, are going to the
highest-paid 10 percent of workers with bachelor’s degrees.


In 1979, the median wage for a Massachusetts worker with a
bachelor’s degree was about 50 percent higher than the median
wage for someone who had not attended college. Since then, real wages
have grown by over one-third for college-educated workers in
Massachusetts, while real wages have been flat for workers who have not
attended college. As a result, Massachusetts workers with
bachelor’s degrees now earn nearly double what workers who
have not attended college earn.





bar graph: Real wages grew faster for workers in MA with higher levels of education





Due to limitations in the data, this analysis does not break
out wage
earners who have earned an associate’s degree from those who
have “some college” but no degree. However it is
worth noting that a growing body of research shows higher earnings for
associate’s degree holders compared with workers who attended
college but did not earn a degree. One recent study of a handful of
states (not including Massachusetts) found that “completing
an associate degree yields on average approximately
$4,640-$7,160” in annual earnings above entering college but
not completing.1
Among full-time, year-round workers
nationally, the U.S. Census Bureau reports that median annual earnings
for those holding an associate’s degree were $46,000 in 2015,
compared with $41,700 for those with some college but no degree (see
chart below).


bar graph: More education leads to more earnings








bar graph: Workers with bachelor's degrees earn 99 percent more than those without





Nationally, median earnings for full-time, year-round workers
with
bachelor’s degrees were 84 percent higher than for high
school graduates in 2015. As the chart above shows, hourly wages for
workers in Massachusetts with a four-year college degree were about
double the wages of those who have not attended college.2


Unsurprisingly, Massachusetts and New Jersey, which have the
highest
percentages of workers holding bachelor’s degrees, also have
the highest median hourly wages.  


bar graph: MA and NJ have the most highly educated workforces in the nation








bar graph: MA and NJ have the highest median wages in the nation








While it might seem obvious in 2017 that higher levels of
college
education would be associated with higher earnings at the state level,
this relationship is actually a fairly recent feature of the U.S.
economy. In 1979, the correlation between the educational attainment of
a state’s workforce and its median hourly wage was weak.





graph: Weak relationship between education and wages in 1979





Since then, the link between educational attainment and
household
income has grown much stronger, as seen in the following chart.
3





graph: Strong relationship between education and wages in 2016





This correlation can be seen within the largest Massachusetts
municipalities, too. Cities and towns with the highest shares of
bachelor’s degrees have the highest median household incomes;
those with the lowest shares of bachelor’s degrees have the
lowest household incomes.


These cities and towns at the lower end of distribution are
almost all
so-called “Gateway Cities.”4
(To learn
more about our Gateway Cities see MassBudget’s report Income
Growth and Gateway Cities: What Happened, and Is There a Path Back to
Broadly Shared Prosperity?.)





graph: Strong relationship between education and income in 2015





Arguably no state has benefited from this ever-strengthening
link
between education and wages more than Massachusetts, where the share of
workers with bachelor’s degrees has skyrocketed over the same
period. Massachusetts saw a greater increase in the share of the labor
force with bachelor’s degree than any other state from 1979
to 2016. In 1979, 20 percent of Massachusetts workers had a
bachelor’s degree or higher. By 2016, this share had grown to
50 percent –
marking the first time that any state has had
half of its workforce with four-year degrees.





bar graph: The proportion of workers with a college education has grown since 1979





Similarly, Massachusetts has seen its median wage –
which was
actually slightly below the U.S. median in 1979 – grow faster
than all but one other state over the same period.





bar graph: MA has seen second highest median wage growth in the nation since 1979





As noted above, the tight correlation between
bachelor’s
degrees and earnings is only a few decades old. The strengthening of
this relationship is complex, and has not progressed uniformly for all
workers. The following chart shows wages at the 10th, 50th, and 90th
percentiles for Massachusetts workers with high school diplomas and
workers with college degrees over the past four decades.





line graph: Gains from college education in MA have gone mainly to the top





At all levels, wages for workers with no more than a high
school
diploma have been stagnant. Wages for the lowest-paid 10 percent of
high school graduates haven’t budged, growing just 2.4
percent since 1979, after adjusting for inflation. Even for the
highest-paid 10 percent of high school graduates, wage growth has been
sluggish, growing just 11 percent in 38 years.


Wages for college graduates at all levels have consistently
been higher
than their high-school graduate counterparts. This difference in
earnings between workers with a college degree and those with no more
than a high school diploma is called the “college wage
premium.”
In 1979, the lowest-paid 10 percent of
bachelor’s degree holders earned 25 percent more than the
lowest-paid 10 percent of high school graduates. By 2016, this college
wage premium had risen to 45 percent. So there has been some increase
in the relative wage benefits of a college education even at the low
end of the earnings spectrum.


But this increase has been quite modest by comparison with
workers
higher up the distribution. In 1979, the median college graduate earned
49 percent more than the median high school graduate; by 2016 this
premium had increased to 99 percent, as seen above in the chart titled
“Workers with Bachelor’s Degrees Earn 99 Percent More Than
Those Without.”


The group that has seen by far the greatest increase in the
relative
earnings benefits of a college degree, however, is the highest-paid 10
percent. In 1979, wages for the highest-paid ten percent of
Massachusetts workers with a bachelor’s degree were 52
percent higher than for the highest-paid ten percent of Massachusetts
workers with a high school diploma. By 2016 this premium had increased
to 130 percent.


But college degrees alone, as the above chart shows, have led
only to
modest gains in wages for the lowest-paid ten percent of Massachusetts
workers with a college degree. Even the median wage for Massachusetts
workers with a college degree stopped growing at the Great Recession,
falling 5.5 percent from 2009 to 2016. Over the past four decades, the
90th-percentile has seen the greatest increases in wages among college
graduates and the greatest increases in the college wage premium.


Expanding access to higher education can benefit both
individual
students and the overall state economy, as workers with a college
degree earn more than those without. But the cost of attending college
has been increasing steadily, and more students are taking on
ever-increasing debt to pay those costs. The increase in student costs
is largely the result of reductions in state funding for public higher
education, which fell $3,000 (on an inflation-adjusted basis) per
student from 2001 to 2016. Meanwhile, costs have been shifted onto
students, as tuition and fees rose $4,000 per student over the same
period. The University of Massachusetts recently announced a 3 percent
tuition increase for the fiscal year 2018, marking the third
consecutive year of increases. (To understand how students bear a
greater share of the costs of higher education as the state has drawn
down its support over the years, see In
16 Charts: Higher Education
Funding in Massachusetts.
)


State funding for higher education is especially important for
supporting students who come from Gateway Cities. As seen above, these
cities have the lowest rates of college-educated workers and the lowest
household incomes.


Most Massachusetts high school graduates who go on to college
enroll at
one of the state’s public colleges or universities. Among
high school graduates who attend college, students from Gateway Cities
are about as likely as students from non-Gateway Cities to attend one
of the public four-year universities in Massachusetts. Gateway City
high school graduates who attend college are more than twice as likely
to attend one of the state’s community colleges, when
compared with graduates from other Massachusetts high schools who
attend college.





bar graph: Gateway city high school grads are more likely to attend communicty college





As we saw above, completing community college and earning a
two-year
associate’s degree leads to higher income than attending
college without completing. Earning a bachelor’s degree has
even greater benefits. Whether students end their studies after earning
their associate’s or go on to enroll in a four-year degree
program, it’s clear that community college can play a
significant role in the success of Massachusetts high school graduates,
particularly those from Gateway Cities.


________________________________


1Clive Belfield and Thomas Bailey, “The Labor
Market Returns to Sub-Baccalaureate College: A Review,” March
2017, p. 7.

2At first glance the charts appear to contradict each other.
On the one hand, there is very little difference between the median
Massachusetts hourly wage of workers with no more than a high school
diploma and that of workers with “some college.” On
the other, median earnings, nationally, increase fairly significantly
with educational attainment. (A separate analysis of average
– not median – earnings for full-time, year-round
workers age 25 and over in Massachusetts, specifically, also shows
significant increases for each higher level of educational attainment.)
The “some college” category in the hourly wage
chart combines workers who started college but haven’t earned
a degree with workers who have completed an associate’s
degree. In Massachusetts, according to the U.S. Census
Bureau’s 2011-2015 American Community Survey, there are twice
as many of the former as there are of the latter. So the lower wages
for workers who started college but haven’t completed are
bringing down the median wage for both groups combined. Separating the
two would likely show more separation between the median wage of
workers with associate’s degrees and that of workers with no
more than a high school diploma. But that would also show the median
wage of workers who started college but haven’t completed a
degree as closer to that of workers with no more than a high school
diploma, which would seem to clash with the finding of a significant
difference in annual earnings between the two groups. It could be that
full-time, year-round workers disproportionately hold jobs that pay
higher hourly wages than the median, which would help resolve the
contradiction, but further analysis is required.

3Noah Berger and Peter Fisher, “A Well-Educated
Workforce Is Key to State Prosperity,” August 2013.

4Massachusetts defines a Gateway City as “a
municipality with a population greater than 35,000 and less than
250,000, a median household income below the commonwealth’s average and
a rate of educational attainment of a bachelor’s degree or above that
is below the commonwealth’s average.” (MGL Ch. 23A
§3A)


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