Feb 18, 2018

Chart of the Day: What's The Value of Higher Education?

Three great charts from the Economist focused on the value of higher education and how it has changed over time. Article notes that "college graduate premium" does exist but that it has leveled off since 2000:

The main piece of evidence cited by policymakers is the “graduate premium”—the difference between the average earnings of someone with a degree and someone with no more than a secondary-school education, after accounting for fees and the income forgone while studying. This gap is often expressed as the “return on investment” in higher education, or the annualised boost to lifetime earnings from gaining a degree. Research by the New York Federal Reserve shows that the return on investment in higher education soared between 1980 and 2000 in America, before levelling off at around 15% a year. In other words, an investment equal to the cost of tuition and earnings forgone while studying would have to earn 15% annual interest before it matched the average value over a working life of gaining a degree.

Three charts below are interactive if you go to the article on the Economist website.

Note: Tertiary degree equals post-secondary (or college) degrees

Questions: 

  • What headline would YOU write to describe this chart?
  • Compare the growth of degree recipients between South Korea and the United States. What would you hypothesize led to this difference in the last 20 years? 
  • What do you think are the advantage of having a higher percentage of college graduates?

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This is a challenging chart to read but worth the effort! This becomes an interactive, where you can identify more jobs if go to the Economist website.

How to read this chart (a lot going on): 

  • X axis is change in share of workers that have bachelor's degrees
  • Y axis is change in earnings from 1970-2015
  • Size of bubble is percentage of workers for that specific job 

Let's look at Registered Nurses and Education Counselors as examples:

  • A much higher percentage of nurses today have bachelor's degrees (about 45% growth since 1970) and that has translated into much higher wages (about 75% growth). The size of the bubble indicates the number of workers in that specific field.  
  • For Education counselors, wages have dropped over 25% with fewer in that field having bachelor degrees (down by about 10%).

Questions:

  • Compare doctors to lawyers using the data on the chart above. 
    • Has either field seen significant jump in workers with bachelor's degrees?
    • How have their earnings varied?
    • Do you have an explanation to account for these difference?
  • The bottom right quadrant has jobs where there are more degree-earners but lower wages. What might explain this phenomenon?
  • Describe two other takeaways you have in analyzing this chart. 

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This chart compares the percentage of workers with a college degree in a given field in 1970 (X axis) compared to workers in that same field with a college degree in 2015. For example, about 40% of Health-record specialists had college degrees in 1970 compared to about 21% who had college degrees in 2015. All occupations to the right of the gray line represent fields where the workforce is less educated (lower percentage of college degrees) in 2015 compared to 1970. Again this graph is interactive if you go to the Economist website.

Questions:

  • What's the headline you would write for this chart?
  • If you can go to the website, find three jobs that you are interested in and describe how they have changed in regards to education level of workers.
  • What does a chart like this tell you about the value of education? 

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Like having your students analyze graphs? Check out NGPF's Data Crunch page for more ideas. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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