With graduation season upon us, many students are reflecting on the value of their diplomas. Not surprisingly, today’s college grads have a huge advantage over high-school grads when it comes to earning — but this is primarily because the value of high-school diplomas has nearly bottomed out.
While college makes good economic sense in the long run, tuition continues to skyrocket, making it more difficult – and risky – for the have-nots to make up lost ground.
According to data recently compiled by the Economic Policy Institute, a think tank focused on labor issues, the gap in earnings between high-school and college graduates reached a record high last year after doubling between 1979 and 2013. The New York Times ran a story on those figures at the end of May, which subsequently triggered a flood of additional commentary and press coverage.
According to the EPI data, a college graduate now makes 95% more than a high-school graduate, up from about 85% in 1979.
This gap is mainly the result of wages for high-school grads crashing in recent decades. Workers without a college degree earned an average of $16.20 per hour in 2013, down from $17.26 per hour in 1979, according to the EPI’s inflation-adjusted numbers. Meanwhile, college graduates earned an average hourly wage of $29.46 last year, up from $24.19 in 1979. Employment Law Attorneys did point out, however, that college wages are down from their high point of $29.65 in 2002.
“Wages have been pretty flat across the board, and that includes college wages,” said EPI economist Elise Gould. “The only reason that the [college] premium has gone up at all is because wages for high-school graduates have actually fallen.”
So why has a high-school diploma lost so much value? First, the inflation-adjusted value of the minimum wage has declined in recent decades. Also, a good number of well-paying jobs once worked by high-school graduates have become mechanized or been shipped overseas. Workers have also lost bargaining power as a result of rising unemployment and the steady drop in union membership. On top of this, low-income workers tend to experience higher rates of discrimination, wrongful termination, wage theft, and other illegal workplace practices – putting them at an additional economic disadvantage.
The chart included above, taken from a student recently published by MIT economist David Autor, shows the lifetime value of a college degree. Not to be overlooked is that fact that this values is much lower for women.
When lost earnings from an individual’s entire working life are taken into account, it actually costs $500,000 to skip college.
However, as other economists and workers rights attorneys point out, the numbers here are only averages. Not every college graduate will hit that average wage, making the cost of college a little riskier than it might seem at first glance. Furthermore, a 2010 study from the Center for American Progress indicates that a significant minority of young college graduates actually earned less than their high-school educated counterparts in 2009.
“The wages of college graduates vary greatly, from very low to very high,” Gould noted, in partly owing to the fact that some students finish college without important tools like internships and professional connections.
Meanwhile, the price of college has been rising by leaps and bounds – much faster than the rate of inflation – creating a bigger “sticker shock” for aspiring undergraduates, expecially low-income students. The price of college tuition jumped 12-fold between 1980 and 2012, according to Bloomberg. At the same time, debt from student-loans has skyrocketed to more than $1 trillion, a number that the Consumer Financial Protection Bureau identifies as a troubling drag on economic growth.
All of these obstacles suggest why there seems to be a shortage of college graduates, which could keep the income gap between college and high-school graduates growing in the future. The number of people — particularly men — entering college has barely changed since it reached its peak in 1974. In earlier decades, the number of male college students grew rapidly, thanks to programs like the GI Bill and attempts to avoid being drafted into the Vietnam War.