© Copyright 2001 by the Wyoming Department of Employment, Research & Planning
The Effect of a College Degree on Wages: The
Different Experiences of Men and Women
by: Sylvia D. Jones, Statistical and Research Analyst
“Female community college graduates earn 18.9 percent less than women with a University of Wyoming (UW) Bachelor's degree and 12.9 percent more than women with no known college degree. Alternatively, men with no known college education earned 4.2 percent less than men with a UW Bachelor's degree.”
Gone are the days when hard working individuals could walk straight from high school graduation into a stable, well-paying job. Instead, we are left with the notion that without a college education, one cannot make enough money to adequately support a family. We are led to believe that people with a college degree make significantly more than those without one. After all, that is the image projected to us by the media. Analysis of Wyoming wage information partially supports this view. Women without a known college education earned 29.3 percent less in 2000 than women with a Bachelor's degree from the University of Wyoming (UW). Female community college graduates were in the middle, earning 18.9 percent less than women with a UW Bachelor's degree and 12.9 percent more than women with no known college degree. Alternatively, men without known college education earned 4.2 percent less than men with a UW Bachelor's degree. Male community college graduates made 16.4 percent less than university graduates. However, they also made 12.7 percent less than men without a college education. It appears that the effects of holding a college degree on earnings in Wyoming are more pronounced for women than for men.
The study of labor market experiences after graduation is useful to a variety of entities. The Wyoming Workforce Development Council stated that it is necessary to develop an understanding of the detailed interactions between the workforce and the labor market.1 This includes looking at the effects of education on an individual's earning capacity in addition to other factors like age, gender, and experience. The Wyoming Workforce Development Council can use this information to establish workforce policy. Additionally, to receive accreditation, institutions of higher education must have assessment processes that provide meaningful and useful information to students, faculty, and administration.2 Research such as this article helps serve this purpose. Students, educators, and administrators can use the information to help determine the efficacy of higher education in Wyoming, even if not institution specific.
Much of the belief that a college education is required for high earnings is fueled by the fact that many high paying jobs in manufacturing, telecommunications, and other industries have been eliminated.3 Technology has replaced people in recent years, spawning layoffs and the elimination of countless jobs that require minimal education. In addition, rising requirements for some professional, managerial, and other jobs have made entry without a degree difficult.4 Experience alone is often not enough, especially when there is an abundance of candidates possessing both experience and education. Since there has been an oversupply of college graduates of late, this effect is more apparent. As an illustration, the number of Bachelor's degrees obtained in the U.S. from 1988 to 1998 grew rapidly despite a decline in the 18 to 24 year old population. During that decade, an estimated 13 million college graduates entered the workforce. The number of degrees is expected to grow by seven percent during the decade 1998-2008, an additional 1.24 million degrees. 5 Because there are so many people with college diplomas, they are displacing those in the same jobs who have work experience but lack the degree.
The question then arises, is the media accurate? Do individuals with a college degree indeed make more money than those without? The Bureau of Labor Statistics (BLS) reports that people with more education have higher earnings and are less likely to be unemployed. For example, the average national wage in 1997 for a full-time worker over 25 with only a high school diploma was $26,000. The average wage for a full-time worker over 25 with a Bachelor's degree was $40,100, a difference of 35 percent. The average unemployment rates in 1998 for these two population segments were 4.0 percent and 1.9 percent, respectively.6
However, nationally, jobs requiring a college degree only account for about 21 percent of all jobs. They are expected to grow more quickly over the decade 1998-2008 than jobs requiring no degree, but they are still expected only to account for approximately 24 percent of the total jobs. Projections for the same period in Wyoming estimate that only 13.5 percent of all new jobs will require a Bachelor's degree or higher.7 Wyoming still has an abundance of high paying jobs that require little formal education, especially in Mining. In 2000, the Mining industry employed 21,909 people, or 7.2 percent of the Wyoming workforce, at an average yearly salary of $38,193.8
The newest Census Bureau information suggests that 90.0 percent of Wyoming residents over the age of 25 graduated from high school.9 Nationally, only 84.1 percent of those over 25 hold a high school diploma.10 In addition, 20.6 percent of the same age group in Wyoming hold a Bachelor's degree or higher while nationally, 25.6 percent earned the same degrees. The difference in these percentages seems to be in line with the fact that Wyoming has fewer jobs requiring post-secondary education than the nation as a whole.
The main purpose of this article is to establish whether or not a college education leads to increased wages in Wyoming. It is well established that nationally, increased education equals increased wages. Does this hold true in Wyoming? This is the type of question we are beginning to look at using the Wyoming Unemployment Insurance (UI) Wage Records administrative database. For a detailed explanation on how this database was developed, see "Enhancing the Quality of Wage Records through Imputation, Parts One and Two," in the April and June 2001 issues of Wyoming Labor Force Trends.11 Unfortunately, at this time we do not have information on educational attainment for all Wyoming residents. For the sake of these analyses, samples were compiled from known graduates of the University of Wyoming and four community colleges in Wyoming, as well as directly from Wyoming Wage Records.
The secondary purpose of this article is to attempt to find a useful proxy for college attendance. To do this we actually created two sub-populations: no known college and college proxy. In this case, we tried to substitute late entry into the workforce (after age 25) for educational attainment. This population segment is labeled in the tables as College Proxy. The age of 25 was chosen for several reasons. The first is that the average age of graduating University of Wyoming Bachelor's degree students in 1997 was 27. It was slightly higher for other degrees awarded. In addition, the UI Wage Records database makes use of the CPS (Current Population Survey) age groups when actual age is unknown. One of these age groups is 25 to 34. Although the traditional college student graduates at approximately 22 years of age, that age falls into the CPS category including 20 to 24 year olds. Since we were trying to find a proxy for educational attainment, including individuals who entered the workforce at 20 seemed counterintuitive. Starting the sample at age 25 appeared to limit the number of reasons for late entry.
We reasoned that there are several explanations why individuals would not enter the Wyoming workforce until they were over 25 years old. Some, but not all, of these include working in another state and then relocating, family obligation, military service, or attendance in higher education. There is no way to control for those who stayed out of the workforce because of family obligation or military service. In order to eliminate, or at least minimize, the effect of those relocating to Wyoming, only Wyoming-issued Social Security numbers were used in all analyses for this article. While there are obviously many possibilities for late entry into the workforce, it was assumed that the majority delayed entry for education.
The college proxy group was compiled directly from Wyoming UI Wage Records. It consisted of individuals employed in Wyoming in 2000 who entered the Wyoming workforce for the first time when they were between the ages of 25 and 34. Again, only Wyoming-issued Social Security numbers were used.
The second sub-population, the No Known College sample, was compiled directly from the Wage Records database. In essence this served as a proxy for no college education. It consisted of individuals with a Wyoming-issued Social Security number who entered the Wyoming workforce before they were 20 years old and worked consistently in Wyoming for a minimum of six years. The rationale for six years was based on the idea that this group worked instead of attending college. Assuming it takes four years to complete college, those graduating in 1997 entered in 1993. If they had entered the workforce at that time instead of going to school, by the year 2000, they should have worked seven years. We decreased the minimum to six years in order to give some leeway for those who did not gain permanent employment immediately after high school. Finally, this group was compared to known University of Wyoming and community college graduates. Any individuals found to be in both files were eliminated from the no known college sample. This was done in order to reduce the number of individuals simultaneously working and going to school. We cannot guarantee that this group did not attend college in another institution so they are referred to as the no known college group.
Both of the sub-populations described attempt to assert a level of educational attainment. The major difference between the two group definitions is in work history. The no known college group all worked at least six consecutive years in Wyoming, starting before the age of 20. The college proxy group had no work experience in Wyoming before the age of 25. Without knowing actual education levels for individuals, and without a larger sample of individuals with known education, we can only guess at educational attainment through methods of elimination (such as the no known college sample). This is an important factor in interpreting the results.
With the exception of Table 1, all of the data presented represent only those aged 25 to 34 in 2000. Table 1 demonstrates that women aged 25 to 34 earned 90.7 percent of the average wages for all women, while men aged 25 to 34 earned only 79.8 percent of the average wages for all men. This is interesting because it appears that women approximate the mean earnings for all women by the time they reach the 25 to 34 year old group and stay there until they reach the age of 65. Men's wages, on the other hand, increase steadily until after the age of 54, when they start to fall slightly. At the age of 65 for men, wages drop by nearly half. This shows that age is associated strongly with wage, especially for men.
The known college graduate sample was compiled from all students who received Bachelor's degrees from the University of Wyoming from 1996 through 1998. This list of graduates was then matched against the Wyoming UI Wage Records administrative database. A resulting sample of 443 was found to still be working in Wyoming in 2000. The community college graduate sample was compiled from graduation lists from four Wyoming community colleges for the years 1996 through 1998. This combined file was also matched against the Wage Records database and resulted in 936 individuals employed in Wyoming in 2000.
To test the differences between the groups, quarterly average wages were computed for each group. Furthermore, mean wages were broken down by gender and primary industry in each quarter.
Results and Discussion
The available data clearly demonstrate that post-secondary education is an advantage to women. Wages dramatically increase as education increases, following the same trend as the national norm. Women earning a Bachelor's degree make the most money, but community college graduates also show increased earnings over those with no known college degree. However, Wage Records do not differentiate between full-time and part-time work. There is the possibility that after earning a degree, women are simply more likely to work more hours than they did before going to school. Women college graduates also tend to move into Government and Services (the industries that employ teachers and nurses) rather than Retail Trade. These industries tend to pay more than Retail Trade (see Table 2), so it seems fair to say women are earning more as they complete their education.
Table 2 shows the quarterly wages for all women aged 25 to 34 in 2000. The industry distribution for all women was very similar to the distribution for women without a known college degree. In addition, the average earnings for all women aged 25 to 34 were higher than the earnings for women without a known college degree (see Table 3). Female community college graduates and university graduates both earned more than the average for all women and demonstrated different industry distributions.
Table 3 shows the quarterly wages for women. Statistical analysis showed significant differences between all groups. 12 University graduates earned more in every industry. On average, they earned $1,633 more per quarter than their no known college counterparts. The wage difference was most pronounced for Retail Trade where women with a degree earned $2,617 more per quarter than those without a degree.
Also in Table 3 are the earnings for female community college graduates. Overall they earned $584 more per quarter than women without any known post-secondary degree. By industry, community college graduates had higher earnings only in Construction, Mining, Services, and Wholesale Trade than the no known college group. However, most of the group was employed in Services and the wage differential between the two groups was substantial ($1,470). When compared to women with a Bachelor's degree, community college graduates overall earned $1,049 less per quarter. In addition, university graduates earned more in every industry although the difference was less than $224 in Services.
For men, post-secondary education does not seem to have a large impact on earnings, at least in the short interim after graduation. Table 4 includes the quarterly wages for men. Table 4 shows that, in general, men with no known degree ($6,606) and Bachelor's degree recipients ($6,895) earned more per quarter than the average for all men in 2000 ($6,435). Community college graduates earned less ($5,765). On average, male University of Wyoming graduates earned $289 per quarter more than the no known college group ($6,895 compared to $6,606). Post hoc analysis revealed that this was not a statistically significant difference.13 Male graduates earned more money (University of Wyoming graduate earnings minus the no known college earnings) in Manufacturing (by $1,473), Mining (by $2,024), Retail Trade (by $536), Services (by $1,307), and Transportation, Communications, & Public Utilities (by $1,208).
Table 4 also describes male community college graduates, who, overall, earned less than the no known college group by $841 per quarter. They earned less in every industry except Construction, Manufacturing, Mining, and Wholesale Trade. They also earned, overall, $1,130 less per quarter than male university graduates. Male community college graduates earned more than men with a Bachelor's degree in Construction and Mining.
These results are somewhat disappointing because it appears that post-secondary education results in either no change in earnings or perhaps even lower wages for community college graduates. There are several possible explanations for this. There seems to be an expectation among the public that graduates should gain employment in the area of their degree and earn increased wages immediately upon graduation. This is perhaps not a fair expectation. In the July 2001 issue of Wyoming Labor Force Trends14 as well as in a forthcoming Research & Planning report,15 we argue that Casper College graduates do not show noticeably increased wages until 9 to 18 months post graduation. Given the analysis of data in Table 1, perhaps in this case, the period for wages to increase is somewhat longer.
The college experience has more than one function. It should not be assumed that all individuals attending post-secondary schools enter the workforce in their new capacity immediately after graduation. Some people use community college as a starting point for a Bachelor's degree. For instance, in 1997, over 80 percent of all Casper College graduates in Engineering, Physical Science, and Mathematics enrolled in the University of Wyoming.16 It is possible that the different purposes for education are gender related. Men tend to enter the workforce immediately, taking jobs of opportunity in industries such as Construction.17 While the wages in these industries tend to be high, the individuals employed therein are vulnerable to displacement. To address this question, it would be worthwhile to conduct a longitudinal study to track individuals after graduation over a period of time, rather than trying to determine what time period is sufficient to show the effects of the education.
Another explanation of the wage differences is the industry distributions. Men without known college degrees are found among Construction, Mining, and Retail Trade. Male community college graduates are distributed among Government, Retail Trade, and the Services industry. Bachelor's degree recipients are distributed mostly in Government and the Services industry. Mining is the highest paid industry in the state, so having a large portion of the no known college degree group employed in that industry raised the mean earnings. It is also possible that in some industries, such as Construction, work experience is more of a premium than education.
Table 5 contains the quarterly wages for all persons aged 25 to 34 combined. For all industries, college graduates earned $672 more per quarter than those with no known college degree. In addition, college graduates earned $1,192 more per quarter than those with a community college degree. Bachelor's degree graduates also earned more in every industry than those without college and those with a community college degree. In general, without looking at the obvious gender interactions, it appears that receiving a Bachelor's degree is beneficial to earnings.
When the wages of the college proxy group were compared to the wages of the University of Wyoming group, there was no clear correlation. The proxy group showed the highest wages of all groups, although not by a great deal for women. In general, the industry distribution for women was similar to the industry distribution in the known Bachelor's degree group. However, this did not hold true for the men. Also, the number of quarters worked for each of the two groups were not similar at all. Overall, there was no meaningful correlation between the groups, especially for men. This suggests that using age of entry into the workforce alone is probably not a good indicator of educational attainment. Perhaps with a larger sample of individuals with known educational attainment, a better proxy can be found.
While there is the possibility that, at least for men, a college education does not ensure higher wages in Wyoming than simply obtaining work experience, it is important not to underestimate the importance of quality of life to career decision making. For many people, wages are not as important as less tangible benefits, such as job security, consistent work hours, or a comfortable work environment. A recent analysis of those who leave the oil and gas industry indicated that most people actually made less money after leaving the industry.18 This clearly suggests that money is not everything, especially as workers mature. Perhaps then, obtaining higher education allows men to secure work that provides the less tangible benefits and in the end makes them happier than higher wages would.
1 Wyoming Department of Employment, Research & Planning, Outlook 2000: Detailed Occupational Projections and Labor Supply, 2000, pp. A1-A21.
2 North Central Association of Colleges and Schools Commission on Institutions of Higher Education, Handbook of Accreditation, 1997, p. 66.
3 Matthew Mariani, “High-Earning Workers Who Don't Have a Bachelor's Degree,” Occupational Outlook Quarterly, Fall 1999, pp. 9-15.
5 Chad Fleetwood and Kristina Shelley, “The Outlook for College Graduates, 1998-2008: A Balancing Act,” Occupational Outlook Quarterly, Fall 2000, pp. 3-9.
6 U.S. Department of Labor, Bureau of Labor Statistics, Occupational Outlook Quarterly, Fall 1999, http://stats.bls.gov/opub/ooq/1999/Fall/oochart.pdf (October 12, 2001).
7 Wyoming Department of Employment, Research & Planning, Outlook 2000: Detailed Occupational Projections and Labor Supply.
8 Adapted from: Wyoming Department of Employment, Research & Planning, “2000 Total for All Industries,” September 6, 2001, http://lmi.state.wy.us/wfdemog/total00.pdf (October 12, 2001).
9 U.S. Census Bureau, “Table 13. Educational Attainment of the Population 25 Years and Over, By State, Including Confidence Intervals of Estimates: March 2000,” December 19, 2000, http://www.census.gov/population/socdemo/education/p20-536/tab13.pdf (October 12, 2001).
10 U.S. Census Bureau, “Table 1a. Percent of High School and College Graduates of the Population 15 Years and Over, By Age, Sex, Race, and Hispanic Origin: March 2000,” December 19, 2000, http://www.census.gov/population/socdemo/education/p20-536/tab01a.pdf (October 12, 2001).
11 Tony Glover, “Enhancing the Quality of Wage Records for Analysis through Imputation: Part One,” Wyoming Labor Force Trends, April 2001, http://lmi.state.wy.us/0401/a2.htm and “Part Two,” Wyoming Labor Force Trends, June 2001, http://lmi.state.wy.us/0601/a1.htm (October 12, 2001).
12 An F test showed the following results: F(1,3) = 383.1, p < .001.
13 Based on a Tukey HSD test for statistical significance.
14 Tom Gallagher, “When Does Training Pay Off? Challenging the Assumptions of the Workforce Investment Act,” Wyoming Labor Force Trends, July 2001, http://lmi.state.wy.us/0701/a2.htm (October 12, 2001).
15 Wyoming Department of Employment, Research & Planning, A Consumer's Guide to Educational Outcomes, [Forthcoming].
16 Wyoming Department of Employment, Research & Planning, A Consumer's Guide to Educational Outcomes.
17 Anthony P. Carnevale and Donna M. Desrochers, Help Wanted... Credentials Required: Community College in the Knowledge Economy, 2001.
18 Tony Glover, Senior Analyst, Wyoming Department of Employment, Research & Planning, Presentation for Rocky Mountain Coal Mining Institute [Unpublished].
Table of Contents | Labor Market Information | Wyoming Job Network | Send Us Mail
designed by Julie Barnish.
Last modified on by Krista R. Shinkle.