Earnings of College Graduates
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This report examines the association between factors such as selectivity and other institutional characteristics, and the earnings of recent college graduates 5 years after graduation. The report addresses a number of questions of interest to students who are deciding which college to attend, as well as to their parents and institutional and government policymakers. These questions include the following:
To address these issues, data from the High School and Beyond Longitudinal Study of 1980 Sophomores (HS&B-So:1980/1992) were combined with information about courses, grades, credits, and credentials contained in the "Postsecondary Education Transcript Study" (HS∓B-So:PETS), a comprehensive source of information about the postsecondary experiences of the HS&B sophomore cohort. Information about the colleges that 1980 sophomores attended came from the Integrated Postsecondary Education Data System (IPEDS), which contains information on enrollment, finances, institutional characteristics, and degrees awarded. In addition, information from the College Board's Annual Survey of Colleges was also included. The combination of longitudinal data, postsecondary transcripts, and institutional data provided a rich and unique source of information with which to explore the research questions.
- Are the earnings of recent graduates associated with the characteristics of the colleges and universities from which they graduated?
- Is where a student went to college more or less important for earnings than the choices he or she made while enrolled about how much effort to expend on studies or which field to major in?
- If some institutional characteristics are associated with higher earnings, which ones are they? Are larger colleges better than smaller ones? Are more selective colleges associated with higher earnings? How much does it matter whether the institution's mission is research or teaching?
- Are institutional effects on earnings the same for women as they are for men, or do these effects vary systematically by sex?
A series of statistical analyses were performed that permitted assessing the net effect of college characteristics on 1991 annual earnings, controlling for differences in student background, labor market characteristics, and higher education experiences, such as grade-point average and major field of study. The results were examined in two ways: first, the contribution of college characteristics to explaining variance in earnings among college graduates (incremental R2), and second, the estimated dollar effects over the course of a working life.
Overall, the net contribution of college characteristics to variance in men's earnings was relatively small, ranging from 2 to 3 percent (table A), somewhat less than the net effect of background characteristics on earnings. Higher education experiences accounted for substantially more variance in men's earnings than either college characteristics or background characteristics (12 percent).
A different picture emerged for women. Institutional characteristics explained more of the variance in female earnings than they did in male earnings. The incremental R2 for women ranged from 5 to 6 percent after controlling for background characteristics, labor market characteristics, and higher education experiences.
Table A. - Estimated contribution of institutional characteristics, higher education experiences, student background characteristics, and student occupation and industry to variance in the 1991 earnings of 1980 high school sophomores, by gender
*All men and women in the samples were 1980 high school sophomores who had earned a bachelor's degree by 1990, who were not enrolled in graduate school in 1991, and who had positive earnings in 1991. The incremental R2 is the change associated with including a particular group of variables in a regression model, compared with not including that group. For details about the models and variables used in these analyses, see the complete report.
SOURCE: U.S. Department of Education, National Center for Education Statistics, High School and Beyond Longitudinal Study of 1980 Sophomores (HS&B-So: 1980/1992
) and 1987 Integrated Postsecondary Education Data System (IPEDS)
. The College Board, 1985-86 Annual Survey of Colleges. (Excerpted and adapted from tables 2 and 3 on pp.24-29 of the original report from which this article is excerpted.)
For both men and women, choice of major was associated with later earnings. The results suggest that the primary mechanism linking major field of study and earnings was the association between major and occupation. For men, controlling for occupation and industry reduced the explained variance attributable to higher education experiences from 12 percent to 4 percent, while the variance accounted for by institutional characteristics remained at 2 percent. For women, however, the pattern was somewhat different. In contrast to men, for whom higher education experiences accounted for almost six times as much variance as institutional characteristics (12 percent vs. 2 percent before controlling for occupation and industry), for women, higher education experiences and institutional characteristics were almost equally important in affecting earnings (6 percent vs. 5 percent). After including information about occupation and industry, the explained variance attributable to higher education experiences fell from 6 to 3 percent. Institutional characteristics still explained about 4 percent of the variance in women's earnings.
Among the college characteristics that mattered for men was attending a selective versus a nonselective institution. Obtaining a degree from a selective institution-as measured by the Cooperative Institutional Research Project rating for colleges and universities, based on standardized test scores of incoming freshmen-was associated with an earnings increment of 11 to 16 percent. Men also benefited from attending institutions with higher per capita spending on instruction.
For women, a different kind of institutional selectivity (measured by the ratio of applicants to admissions) was associated with higher earnings. A unit increase in this ratio was associated with about a 12 percent increase in earnings. Attending a selective liberal arts college and attending an institution located in the Mid-Atlantic region or New England also had significant positive effects on women's earnings.
Although college characteristics appeared to account for a relatively small proportion of the total variance in earnings for men, and somewhat more but still relatively little for women, they were nonetheless quite important. For men, attending a college whose characteristics were one standard deviation above the average* was estimated to be worth an additional $2,311 in annual earnings, or an 8.1 percent increase above the average of $28,567. For women, the comparable increment was $3,746, or a 17.4 percent increase above the average of $21,590. These effects are comparable to the estimated effect of attending an additional year of college.
The results of these analyses should offer some consolation to students and their families as they sit down to decide where to attend college. Although differences among colleges can have a large effect on lifetime earnings, decisions that students make (especially major field of study) have substantial effects on later labor market outcomes regardless of which college they attend. From this perspective, students may choose to avail themselves of the least expensive alternative that provides the major in which they are interested.
For this analysis, a composite institutional characteristics variable was constructed for each college.
The NCES High School and Beyond Longitudinal Study of 1980 Sophomores (HS&B: 1980/1992
) and 1987 Integrated Postsecondary Education Data System (IPEDS). The College Board's 1985-86 Annual Survey of Colleges.
For technical information, see the complete report:
Fitzgerald, R.A. (2000). College Quality and the Earnings of Recent College Graduates
Author affiliation:R.A. Fitzgerald, MPR Associates, Inc.
To obtain this complete report (NCES 2000-043),
call the toll-free ED Pubs number (877-433-7827), visit the NCES Web Site (http://nces.ed.gov
), or contact GPO (202-512-1800).