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College Still Pays, Mostly

Nearly everyone has a story. The promising child who moves back home after college, unable to get a job that pays a living wage. The Phi Beta Kappa in English Lit. who now serves up cafe lattes for $7.50 an hour at the corner Starbucks.

Several years ago, Daniel Hecker, an economist at the Bureau of Labor Statistics, published an article that seemed to capture these anecdotes in the data. Hecker found that 18 percent of Americans with four-year college degrees were working in jobs paying "high school" wages, up from 10 percent in 1970.

Hecker's article was quickly picked up and popularized by a press and public anxious about the declining fortunes of American workers. Hecker himself used the data to warn high school students of an imbalance between the supply of college graduates, which was growing rapidly, and the demand, which was lagging behind.

But now three researchers have come to more encouraging conclusions.

Frank Levy, an economist at the Massachusetts Institute of Technology, and Richard Murname, a professor at the Harvard University School of Education, along with graduate student John Tyler, found that the latte bar phenomenon is largely confined to very young college graduates. While the median wage for a 23-year-old college graduate was only slightly above that of high school graduate of the same age, the difference widened rather quickly by the time the two had reached the age of 30.

Their message to college graduates and their anxious parents: Just be patient and it's likely it will all work out.

There is no question that college graduates can no longer expect the good life to be handed to them with their diplomas, as was the case during the postwar "golden years." In 1960, less than 8 percent of the adult population had a college degree, while today it's closer to 22 percent, with another 7 percent holding a two-year associate degree. Hecker and his colleagues predict that the percentage of the work force with college degrees will continue to increase, with the number of college diplomas outpacing the number of new "college" jobs by about 31 percent.

"What we want people to understand is that a college degree is not a guarantee of a good job and high earnings," Hecker said yesterday.

Levy and his team put a slightly different spin on the data. The increase in the percentage of college graduates taking "high school" jobs largely reflects, they argue, a 1970s phenomenon in which a glut of college-educated baby boomers was suddenly dumped on the market. It is these "older" college graduates -- age 45 and up -- who are increasingly earning high school graduates' wages because they are in excess supply, largely as a result of corporate restructuring and downsizing. By 1989, for example, the percentage of older male workers with college degrees who earned high school wages had increased to 18 percent, from 14.5 percent a decade earlier.

For the recent, young college graduate, Levy & Co. find a rosier picture. While as many as one third of college graduates, age 25 to 34, earned less than the median income of high school graduates in 1979, that figure had fallen to one quarter by 1989.

Even among those college graduates holding "high school" jobs, the diploma apparently is not wasted. The Cambridge researchers found that they still get paid more than high school graduates holding the same jobs -- a modest 8 percent premium in the case of young males, and a whopping 40 percent premium in the case of young females.

So what's the answer -- is a college education worth the time and money involved? Well, it depends.

These days, according to the Education Department, the average annual out-of-pocket cost of attending a four-year college is about $10,000, averaging together both public and private schools. In addition, college students forgo about $15,000 on average in annual wages by studying rather than working. All told, that's about $100,000 on average over four years.

If all that money were borrowed at an 8 percent interest rate, that would mean that a college graduate would have to earn an $8,000 wage premium annually to justify his or her educational investment. And as the data indicate, that threshold isn't reached, on average, until after the college graduate reaches the age of 30. Over a lifetime, however, the data suggest that the value of the college diploma is both indisputable and increasing.

As Hecker and his colleagues point out, the economy probably would be better off if there were some way to redirect the "bottom 20 percent" of each college class into other education and training paths that might be more in keeping with their skills and the needs of the economy.

But the problem with such a proposition is that it is difficult to figure out, in advance, which college graduates are the ones who will fail to make the grade, income-wise. And undoubtedly there are some college graduates who place a high value on things other than future earning potential.

A college-educated social worker, for example, may earn less than the median wage of a high school graduate, but gets pleasure from helping others. Who is to say that person should not go to college? And is there any doubt that, among the social workers in a given office, it is the college graduate who has the best chance of rising through the supervisory ranks, eventually earning the income and status that goes with it?

Something to consider over your next double latte.