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Title: The Value of a College Education in Tennessee

Citation Type: Miscellaneous

Publication Year: 2023

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Abstract: The labor market and broader economy remain in flux as the U.S. unevenly rebounds from COVID-19 disruptions to health, education, work, prices, and every aspect of life. One silver lining of these disruptions, for job seekers, has been an exceptionally tight labor market with rising wages and expanding job opportunities. The bottom of the pay scale has risen the most in percentage terms, benefitting jobs that are less likely to require a college education. This may be part of the reason why there are over 1 million fewer students enrolled in U.S. higher education than before the pandemic (National Student Clearinghouse, 2023). In Tennessee, the percent of high school graduates going straight to college fell from 61.7 to 52.8 percent between 2019 and 2021 (THEC and TSAC, 2022), the lowest level in at least ten years, before climbing to 54.3 percent in 2022 (THEC and TSAC, 2023). Additionally, worker and skill shortages have led many employers to develop in-house training and credential pathways, leading some to question the value of college in the post-pandemic economy (Fain, 2020; Hufford, 2022; Nietzel, 2022; Wingard, 2022). Is college still “worth it” in this environment? Workers with postsecondary credentials tend to earn significantly more than workers without college. On average, the gap is large enough to make up for the time and expense that a student invests in college. Carnevale et al. (2021) analyze nationwide earnings by education and estimate that a U.S. worker with a bachelor’s degree earns $1.4 million more over their career than someone with a high school diploma, and that an associate’s degree corresponds with $452,000 more in lifetime earnings than a high school diploma.1 Abel and Deitz (2014, 2019) estimate that the internal rate of return to college is 13-14% for an associate’s degree and 14-16% for a bachelor’s degree, both of which compare very favorably to the historic 7% inflation-adjusted return on stocks. Carruthers et al. (2023) replicated these analyses for the post-pandemic U.S. They find a consistent 14-15% return on time and tuition costs of attaining a bachelor’s degree before, during, and after the pandemic. They also estimate that returns to associate’s degrees fell from 15.0% to 9.5% between 2016 and 2022, driven in part by rising relative pay for workers without college, and that returns on attaining some college credit but no degree have fluctuated around 7%. This is consistent with research using pre-pandemic data, which generally finds that college is less likely to pay off for students who do not finish (Webber, 2018; Cooper, 2021). In this note, I add to an extensive body of research on the individual return to college with a more focused analysis of the value of going to college for Tennesseans. Findings append to what Carruthers et al. (2023) showed for the post-pandemic U.S. by drilling down to the state level with further analysis for subgroups of Tennesseans with different demographic profiles, who live in different parts of the state, or who have degrees in different fields. Results are broadly in agreement with Carruthers et al. (2023) and pre-pandemic research on the nationwide returns to college. Tennesseans with bachelor’s degrees earn $1.4 million more over their careers than Tennesseans with high school diplomas, or a 14% return relative to the direct and indirect costs of enrolling in college for four years. Associate’s degrees are worth $417,000 more in lifetime earnings, amounting to an 11% return relative to the costs of enrolling for two years. Workers with some college but no degree earn $258,000 more over their career than high school graduates who did not attend college, which represents a 7% return. Estimates are limited to the individual financial benefits of college and exclude any non-financial or societal benefits of higher education. I also find evidence of inequality by gender and race in the college income gap and return to college. A college degree does not increase lifetime incomes as much for women or Black, Hispanic, American Indian, and Multiracial workers in Tennessee as it does for White, non-Hispanic men. Nevertheless, estimated returns to college are large for all gender and race/ethnicity subgroups in Tennessee: 12-19% for associate’s degrees, and 12-16% for bachelor’s degrees. For Tennesseans with bachelor’s degrees, majoring in business, science, or engineering is associated with higher lifetime incomes than education, arts, humanities, communication, or other fields. Women are over-represented in lower-earning fields, particularly education. About 4 out of 5 Tennesseans with bachelor’s degrees in education are women, and the estimated lifetime return on education degrees is only 7%, the same as the return on enrolling in college without completing a degree.

Url: https://haslam.utk.edu/wp-content/uploads/2023/08/Carruthers-TN-Value-of-College-2023-08-08.pdf

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Authors: Carruthers, Celeste K

Publisher: University of Tennessee Knoxville

Data Collections: IPUMS USA

Topics: Education, Health, Labor Force and Occupational Structure, Work, Family, and Time

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