ITS NOT JUST THE MONEY The Benefits of College Education to - - PowerPoint PPT Presentation
ITS NOT JUST THE MONEY The Benefits of College Education to Individuals and to Society LUMINA ISSUE PAPERS PHILIP TROSTEL UNIVERSITY OF MAINE You already know It is now widely accepted that education creates human capital,
UNIVERSITY OF MAINE
It is now widely accepted that education creates “human
The “college earnings premium” is frequently used to
$9,668 $7,555 $12,168 $32,112 $26,016 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Average Annual Earnings
$24,010 $31,565 $36,178 $56,122 $82,139 $14,342
$205,009 $152,926 $246,396 $625,483 $419,467 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of Lifetime Earnings (At Age 19 using a 3% Discount Rate)
$549,010 $701,936 $795,406 $1,174,493 $1,593,959 $344,001
There is no sign of a shrinking college earnings
In fact, the college earnings premium has generally
0% 20% 40% 60% 80% 100% 120% 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Trend in Degree Premia in Earnings
High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
The large monetary payoff to college education has been
Two unfortunate side effects:
Numerous other important benefits tend to get overlooked. It fuels the perception that college education is primarily a private good
and thus there is little need for taxpayer support.
Our actions are speaking. Public support for higher education:
Falling relative to national income (since early 1980s) Falling relative to total government spending (since about 1980) Falling relative to net student/family contributions
The “other” benefits are at least as important as the well-
They are not just the gravy.
The report compiles evidence from several different literatures
Most of the data are from 2012. The benefits from college attainment are emphasized, not the
The benefits from research and public service activities are not
quantified.
Numerous effects are separately summarized, but they are
A simple summation risks double counting.
The report does not deal with issues of causation.
The correlations could be the result of omitted-variables bias (a.k.a.
“ability bias” in this context).
The literatures have found that instances of causal estimates being
noticeably lower than the observed correlations are uncommon.
Some other private benefits of college attainment:
Greater fringe benefits from employment Reduced risk of unemployment Better health and reduced risks of disability and mortality Increased savvy in making consumption and financial decisions Reduced risk of imprisonment Better marriages Increased life satisfaction These benefits are partially passed on to their children
$836 $1,859 $2,267 $2,568 $3,226 $3,984 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Average Annual Employer Contribution for Health Insurance
9.2% 26.6% 33.1% 38.8% 45.7% 54.7% 0% 10% 20% 30% 40% 50% 60% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Retirement Plan through Employment
13.6% 9.6% 7.8% 6.0% 4.4% 3.1% 0% 2% 4% 6% 8% 10% 12% 14% 16% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Unemployment Rate
15.0% 19.5% 23.5% 25.2% 34.7% 39.2% 38.4% 50.5% 57.4% 61.3% 72.6% 76.1% 0% 10% 20% 30% 40% 50% 60% 70% 80% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Self‐Reported Health
Excellent Excellent or Very Good
Hummer and Lariscy (2011) found that the mortality rate is
They also show that college attainment is inversely related to all
The strongest negative effects on mortality are for diabetes and lung
cancer, followed by respiratory disease and external causes (homicide, suicide, and accidents).
Meara et al (2008) estimated life expectancy at age 25 (in
Mokdad et al (2004) indicate that “modifiable behavioral risk
Smoking is the leading cause of death, followed closely by poor diet
and physical inactivity, with alcohol a distant third.
Cutler and Lleras-Muney (2010) found that college education
a positive relationship with exercise a positive relationship with eating fruits and vegetables negative correlations with both obesity and heavy drinking a positive correlation with seat belt use positive correlations with various types of preventative medical care
College education also creates substantial benefits to the rest
Some external benefits of college attainment:
Probably the most important is knowledge creation and technological
change fostered by college education, but this is not quantified.
“Productivity externalities” “Fiscal externalities” “Philanthropic externalities” “Civic externalities” (a.k.a. “social capital”)
Education not only increases the incomes of those being
Regional data on income and college attainment suggest that
The greater regional income associated with greater regional college
attainment is substantially more than can be explained by the greater incomes of graduates.
Estimating the magnitude of productivity spillovers is
Greater earnings associated with higher education create
The lower incidences of poverty, unemployment, disability, etc
$1,300 $43,868 $75,206 $80,629 $175,234 $258,045 $6,065 $15,380 $22,709 $24,564 $43,248 $60,070 $31,760 $43,108 $49,552 $55,373 $62,082 $72,750 $24,304 $34,208 $38,813 $40,775 $47,947 $53,025 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Less than High School Diploma High School Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of Lifetime Taxes (At Age 19 using a 3% Discount Rate)
Federal Income Taxes State Income Taxes Property Taxes Sales Taxes
$443,890 $328,511 $201,341 $186,280 $136,564 $63,429
$51,090 $33,709 $24,772 $22,053 $11,097 $7,638 $33,430 $15,430 $10,059 $6,626 $2,116 $981 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 Less than High School Diploma High School Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of Lifetime Public Assistance (At Age 19 using a 3% Discount Rate)
Medicaid SNAP School Lunches Cash Assistance Energy Assistance Housing Subsidy
$9,394 $14,480 $31,803 $38,617 $54,155 $95,454
$5,804 $7,928 $7,303 $7,140 $5,319 $4,179 $13,971 $7,110 $3,642 $3,043 $1,421 $652 $1,921 $2,445 $2,987 $1,847 $1,969 $2,122 $969 $1,656 $1,594 $1,069 $544 $553 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Less than High School Diploma High School Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of Lifetime Social Insurance (At Age 19 using a 3% Discount Rate)
Unemployment Insurance Supplemental Security Disability Workers' Compensation
$7,506 $9,253 $13,099 $15,527 $19,139 $22,664
$53,079 $8,488 $4,055 $4,055 $1,190 $725 $11,966 $7,402 $5,072 $3,573 $1,950 $911 $4,045 $2,502 $1,714 $1,208 $659 $308 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 Less than High School Diploma High School Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of the Lifetime Public Costs of Incarceration and Uninsurance (At Age 19 using a 3% Discount Rate)
Corrections Cost Uninsured Cost to Government Uninsured Cost to Private Sector
$125,510 $237,369 $307,089 $333,373 $510,814 $668,046 $288,329 $211,431 $180,110 $161,245 $129,762 $120,056 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 Less than High School Diploma High School Some College Associate's Degree Bachelor's Degree Advanced Degree
Present Value of Total Lifetime Fiscal Effects (At Age 19 using a 3% Discount Rate)
Taxes Expenditures
Trostel (2010) estimated the fiscal benefits relative to the cost
From taxpayers’ point of view each potential college degree is,
conservatively, worth $481,000 ($556,000 in various fiscal benefits minus the $75,000 cost).
Net government spending per college degree was negative!
The reduction in spending after college is greater than public spending on college
education. The real internal rate of return on taxpayer investment in college
students was, conservatively, 10.3%.
The real internal rate of return to state and local governments was
3.1%, on average.
Figure 4 Cumulative Fiscal Effect per Four-Year Equivalent Degree
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 19 23 27 31 35 39 43 47 51 55 59 63 67 71 75 Age Cumulative Fiscal Effect
$163 $410 $759 $840 $1,665 $2,682 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Value of Volunteered Labor
$3,434 $5,757 $7,076 $1,801 $19,974 $31,805 $66 $188 $332 $137 $1,642 $4,052 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Earnings Sacrificed for Not‐for‐Profit Employment
Earnings Differential Average Contribution
$26 $49 $79 $94 $279 $682 $140 $334 $533 $599 $981 $1,512 $1 $2 $4 $8 $44 $161 $0 $500 $1,000 $1,500 $2,000 $2,500 Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Annual Charitable Contributions
Charities Religious Organizations Educational Institutions $167 $385 $616 $701 $1,304 $2,355
6.6% 10.1% 17.2% 18.7% 26.3% 34.1% 1.6% 4.9% 7.4% 8.6% 10.0% 13.7% 13.2% 14.5% 19.6% 22.2% 27.4% 31.7% 0.9% 3.1% 5.8% 6.8% 8.2% 12.9% 19.3% 25.9% 36.3% 40.2% 48.5% 58.9% 0% 10% 20% 30% 40% 50% 60% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Participation in Organizations
School or Community Assoc. Service or Civic Org. Religious Institution Other Org. Any
3.6% 6.0% 8.8% 9.9% 12.9% 17.3% 2.7% 5.6% 9.1% 10.8% 14.7% 20.2% 0% 5% 10% 15% 20% 25% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Community Involvement
Worked on a Community Project Attended a Community Meeting
61.8% 65.8% 68.9% 70.1% 71.9% 72.5% 41.2% 44.2% 45.9% 46.8% 47.8% 49.2% 37.6% 51.6% 54.5% 58.8% 64.4% 68.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% Less than High School Diploma High School Diploma Some College Associate's Degree Bachelor's Degree Advanced Degree
Interactions with Neighbors
Speak with Neighbors Exchange Favors with Neighbors Trust Neighbors
Crime is essentially negative citizenship. Lochner and Moretti (2004) estimated the reduction in
Extrapolating their estimates:
The PV of the lifetime bachelor’s degree premium in the victim
costs of crime is 21% as large as the lifetime effect on earnings, and 45% as large as the bachelor’s degree fiscal externality.
It is not overstatement to call the typically emphasized
There are more benefits to college education beneath the surface
than above it.
These are just the (imperfectly) measurable benefits of
There are numerous important but difficult-to-quantify effects such
as the positive influences on innovation, culture, diversity, and tolerance.
In addition to its emotional appeal, the
Compromising college access makes us all
Report:
https://www.luminafoundation.org/files/resources/its-not-just-the-
money.pdf
Excel charts:
http://network.bepress.com/explore/education/education-
economics/?facet=subject_facet%3A%22Phil+trostel%22