Journal Issue: Opportunity in America Volume 16 Number 2 Fall 2006
The Effect of Postsecondary Schooling on Earnings
Higher education influences social mobility not only because family income affects schooling but also because schooling affects the income of adult children. Research on the link between schooling and earnings is extensive.
In a recent review of research, Orley Ashenfelter, Colm Harmon, and Hessel Oosterbeek compare the findings of several types of studies of the labor market returns to education. They find that across twenty-seven studies in nine countries, the market-based returns to schooling are large and robust, ranging from 6.6 to 9.3 percent. After adjusting for “publication bias” (the tilt inherent in the scholarly publication process leading to a higher probability of acceptance for studies with statistically significant results), they find estimated rates of return between 6.8 and 8.1 percent for the United States.36
Building on these overall findings, a few studies have estimated how returns to schooling differ by quality and type of institution. Thomas Kane and Cecilia Rouse find that the returns to one credit at a two-year or four-year college are roughly 4–6 percent for every thirty completed credits. They find, further, that the “sheepskin effect” of degree completion over and above the value of the credits completed is small but positive for men who complete a B.A. and for women who complete the associate's degree.37 Researchers have also estimated returns to the quality of four-year college. One study finds positive effects of elite colleges on earnings.38 But another finds that students who attend more elite colleges do not earn more than students who were accepted by comparable colleges, but attended less elite colleges.39
Similarly, a few studies have sought to identify the lifetime returns to education for youths from different socioeconomic backgrounds. In general, the earnings gains for students from high-income families exceed those for students from low-income families. For example, Jeff Grogger and Eric Eide indicate that, controlling for other characteristics, the discounted present value of income gains over the first nine years of work for white males with high grades in high school is 8 percent greater when family income is in the $70,000 annual income range than for students from families with annual income in the $30,000 range.40 Similar differences exist for students with other characteristics.