Economic and Other Outcomes of Education ---------------------------------------- Education is an investment in human skills. Like all investments, it involves both a cost and a return. The cost of finishing high school is quite low, for it principally includes the earnings given up by not working or not working full time while in high school. In this case, the earnings given up are the earnings of high school dropouts 16-19 years old, which are low. The cost of attending college is higher, but principally includes tuition, books, and fees, and the earnings given up by not working or by working part time while in college. In contrast, the returns come in many forms. Some are monetary, others personal, social, cultural, and more broadly economic. Some are directly related to the labor market, others are not. Some accrue to the individual, others to society and the nation in general. Among the returns related to the labor market are better employment opportunities, jobs that are less sensitive to general economic conditions, better opportunities to participate in employer-provided training, and higher earnings. Other returns not related to the labor market and often attributed to education include greater interest and participation in civic affairs, better health and longer life, and reduced criminal behavior. The costs and returns to investing in postsecondary education change over time, (1/) which affects the incentive for individuals to participate. Measures presented in this section illuminate changes in the rewards to finishing high school, or conversely, the penalties of not finishing, and changes in the rewards of investing in postsecondary education. These indicators suggest some general conclusions regarding the penalties of not finishing high school. First, the immediate difficulty of making the transition from full-time school attendance to full-time work appears much greater for those who leave school before finishing high school. In October 1990, of young people who had left high school during the previous year without finishing only 47 percent were employed. In contrast, of those who had graduated from high school in 1990 and did not enroll in college, 68 percent were employed (Indicator 29). Among college graduates in 1986 not continuing to graduate school, the employment rate was more than 90 percent 1 year after graduation.(2/) In time, some of the problems of making the transition from school are solved. For example, of males who graduated from high school in 1990 and did not enroll in college the following October, 74 percent were employed (Table 29-1). Among males 25 to 34 years old with 12 years of schooling, 85 percent were employed (Indicator 30). This suggests that as high school graduates who do not go on to college get older, the percentage employed rises. Nevertheless, how long it takes to solve the initial transition to work problem is an indication of its difficulty. Second, labor market opportunities for high school graduates, at any age, have consistently been better than for those who have not finished high school. For males 25-34 years old, 85 percent of high school graduates were employed in 1991 versus 70 percent of those who had not finished high school. For females, the disparity was even greater-67 versus 42 percent (Indicator 30). On the other hand, labor market opportunities for males seem to have worsened in the last 20 years for both high school graduates and dropouts, although the decline was larger for the dropouts. For example, the employment rate of male high school graduates 25-34 years old averaged 91 percent between 1971 and 1979, but 86 percent between 1980 and 1990. Third, beyond lower employment rates, among those who find work during the year, earnings are lower for those with less education. Between 1986 and 1990, the earnings penalty of not finishing high school (compared to finishing and not continuing on to college) was an average of 27 and 28 percent for white and black males, respectively. The earnings penalty was larger for females-39, 42, and 34 percent for whites, blacks, and Hispanics, respectively. For white males, there is some evidence that the earnings penalty is growing (Indicator 31). Turning to college education first, labor market opportunities for male college graduates were strong and fell very little during recession years. Consistently over 90 percent of college graduates men were employed. On the other hand, the labor market opportunities for male high school graduates fell more during economic recessions (Indicator 30). The ratio of average annual earnings of college graduates to those of high school graduates provides an indication of the incentive to attend college. For white males 25-34 years old, the college premium increased from about 15 percent during the mid 1970s to over 40 percent in the late 1980s and 1990. For black males the college premium was even larger. Overall, the earnings premium of college graduates in recent years is at its highest levels of the 1970-1990 period (Indicator 31). Second, labor market opportunities for women, both high school graduates and those who attend college, grew enormously between 1971 and 1991. The proportion of females 25-34 years old with 4 or more years of college who were employed increased from 57 to 83 percent over the period. The proportion of high school graduate women employed grew from 43 to 67 percent over the same period (Indicator 30). The earnings advantage enjoyed by college graduate women over their high school graduate counterparts was even larger than it was for men.(3/) For white females 25-34 years old, the advantage was 89 percent in 1990. For black women it was 109 percent. These were among the highest earnings premiums enjoyed by college women during the 1970-1990 period (Indicator 31). While there is a great earnings premium for graduating from college, there are great differences among college graduates who chose different fields of study (Indicator 2:14, 1991). Computer science and engineering majors earn the highest starting salaries-36 percent above the average across all fields among 1986 graduates. Education majors earn the lowest starting salaries-18 percent below the average. College students appear to be sensitive to these differences. The percentage majoring in engineering and computer science increased from 9 to 17 percent between 1977 and 1986. The percentage majoring in education fell from 18 to 9 percent over the same period.(4/) There is a strong positive relationship between voting and educational attainment. Those with the most education are the most likely to vote. For example, in 1990, within the population aged 25-44, college graduates were 67 percent more likely and high school dropouts were 48 percent less likely to vote than high school graduates. Also, differences in voting behavior, by education, have widened over time among 25- to 44-year-olds (Indicator 32). Many factors may influence this relationship. On the one hand, those with more education may feel a greater responsibility to vote than those with less education. On the other hand, those with more education generally have a greater value of their time and usually are less likely to engage in activities that require more time than money. NOTES: (1/) See Murphy, Kevin and Finis Welch. "Wage Premiums for College Graduates: Recent Growth and Possible Explanations." Educational Researcher, May 1989 for a more detailed presentation of changes between 1964 and 1986 in the relative earnings of workers with different levels of education and experience by sex and race. (2/) U.S. Department of Education, Survey of Recent College Graduates, 1987, unpublished tabulation. (3/) However, women who are college graduates earn less on average than their male counterparts. (4/) Changes in employment opportunities for teachers are affected by the changing enrollment of elementary and secondary school children. Between 1971 and 1984 enrollment declined but since has been rising slowly (Indicator 34).