Pay Gaps by Education Level Reach New High

By Caralee J. Adams — May 29, 2014 2 min read
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As high school graduates and their families prepare to write those first tuition checks this fall, they can take heart in new data that show a college degree really does pay off in the long run—that is, for most people.

In 2013, Americans with a bachelor’s degree (exclusively) earned 82 percent more per hour, on average, than those with only a high school diploma, according to a new analysis of U.S. Department of Labor statistics by the Economic Policy Institute in Washington. Those with advanced degrees, earned 137 percent more.

That gap has increased since 1980, when having a four-year degree increased wages by 43 percent and an advanced degree provided a 73 percent boost.

Heidi Shierholz, a labor economist with EPI, a nonpartisan think tank that recently released updated wage data noted, however, that wages for college graduates have been flat since 2001, adjusted for inflation.

“The one and only reason the college premium has gone up is because wages for those with only a high school diploma have gone down, not because wages for college graduates are going up,” she said in an interview. “If you are a college degree holder, on average, you make you more than someone without....but it’s entirely due to high school educated workers losing ground.”

And there is a wide range in wages among college-educated Americans, added Shierholz. At a time when there is an increasing college-for-all push, Shieholz said that someone with a degree at the lower end of earnings may not be that much better off economically than the average high school-educated worker.

“College earnings are not a monolithic thing. There is a ton of variation,” she said. “Absolutely, on average, you are better off with a degree. But it’s an average. It’s not going to be true for everyone.”

Just as about half of all jobs now do not require any education beyond high school, the same will be true in about 10 years from now, said Shierholz, citing projections from the U.S. Bureau of Labor Statistics. “Yes, there is an ever-increasing demand for skilled workers, but there is also an increasing supply,” she said.

The shifting need for educated workers will be a slow evolution. As policymakers become aware of the rising inequality among Americans, Shierholz said the answer is often: “Get everyone a college degree.” However, there is a need to think more broadly about how to increase wages for workers at all levels of education since there are only so many jobs that will require a college education.

“A lot of people enter college assuming the average is going to fit them,” said Shierholz. “They are going to make this big investment in money, time, and energy and come up with the promise of a job to pay back loans and have a middle-class lifestyle. It’s just not the case for everyone.”

An article in The New York Times May 27 examines further the question of the value of college, making the case with the data that the investment is clearly work it for most students.

Earlier this month, EPI pushed a paper, the Class of 2014, outlining the challenging job market that recent college graduates will be facing this year.

A version of this news article first appeared in the College Bound blog.