Career Advice

Big Shifts in Economy Give College-Educated Workers Clear Edge

By Caralee J. Adams — April 14, 2015 3 min read
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As high school seniors weigh their college offers this month, there is more evidence that investing in higher education is worth it: College-educated workers in America now make 80 percent more on average than workers without a college degree.

That wage advantage is twice as much as it was 50 years ago, when workers with a high school diploma could often make a competitive salary in the manufacturing sector.

A new report released Monday by the Georgetown University Center on Education and the Workforce documents the shift to a high-skilled economy where more college-educated workers are in demand, but not enough are graduating.

The underproduction of college talent is causing employers to bid up the salaries of those with a degree, widening the income-inequality gap. Anthony P. Carnevale and Stephen J. Rose, both of Georgetown and authors of the report, “The Economy Goes to College,” say more needs to be done to increase access to college, particularly for those from disadvantaged backgrounds, and increase funding to eliminate what has become a two-tiered system of quality in higher education.

Right now, the United States is on track to produce about 8 million college-educated workers in the next 15 years, but the report suggests that the nation could reduce income inequality significantly by adding closer to 20 million Americans with degrees to the workforce.The influx of educated workers in the economy would mean a college education would have closer to a 46 percent wage premium over someone who only went to high school, but would still be enough to justify the investment in tuition, the economists maintain. And such an increase in degrees would raise total economic output in the country by $500 billion a year by 2025.

The report chronicles the changing dynamics of the workplace and the premium placed on education since high school. It notes that the share of workers with a four-year college degree or more increased from 13 percent to 32 percent since 1967. Over 60 percent of the American workforce has completed at least some college education, up from about 25 percent in the same period.

College-intensive business services have replaced manufacturing as the U.S. economy’s largest industry cluster. This includes jobs in consulting, accounting, management, legal services, and finance. In 1967, manufacturing was responsible for 31 percent of all value added in the economy and now it is 16 percent, while the business services sector has expanded from 12 percent to 26 percent of the economy.

The report outlines the fundamental shift from an industrial economy based on production to a more complex system that values variety, customization, technology, and innovation. This has driven demand for more educated workers, even those with some postsecondary training needed for middle-level jobs that often involve deeper and broader sets of skills.

Employers have raised entry-level education requirements for their workers and expect them to engage in lifelong learning on the job, the authors note. Nearly 64 percent of the workforce today is employed in office-based work and high-skill services.

Students who attend the top 500 colleges and universities have far better outcomes than those who attend other institutions, which are more likely to serve low-income or minority students. In addition to broadening access for all students to quality institutions, the report suggests America needs to invest much more heavily in the rest of the postsecondary institutions to close the gap between the two tiers.

“Education is not just the preferred path, but increasingly it’s the only reliable path to a middle-class life,” the authors conclude. “And so it makes the task of reform that much more urgent....By pursuing policies that significantly expand postsecondary education and training, America can help ensure that the great wealth of our post-industrial economy is much more widely shared.”

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