The FRED Blog has discussed the income and wealth gains from graduating college and how to pay for a college education using a 529 saving plan. Today, we discuss how the type of college a student attends impacts their future earnings.
The FRED graph above shows US Bureau of Labor Statistics data on the income of an average college graduate. That income is shown in proportion to the income of an average high school graduate, which makes it easier to see the impact of higher education. Between 1996 and 2012,* on average, college graduates earned twice as much income as high school graduates.
However, this average doesn’t fully describe the experiences of different groups of college graduates. For insights on this topic, we need to refer to some recent research:
Oksana Leukhina and Mickenzie Bass at the Federal Reserve Bank of St. Louis find that income among college students varies widely according to the type of institution they attended. With data from the US Department of Education, they show that median students from the most selective schools earn 75% more than median students from the least selective schools.
Moreover, they find that college characteristics such as the amount of money spent in educating each student and the share of students majoring in science, technology, engineering, and mathematics (STEM) can explain a substantial share of the earnings gap between different groups of college graduates.
For more about this and other research, visit the publications page of the St. Louis Fed’s website, which offers an array of economic analysis and expertise provided by our staff.
*Note: These BLS data come from an older, discontinued series; the newer series is currently being updated in FRED.
How this graph was created: Search FRED for and select “Income Before Taxes: Wages and Salaries by Education: Bachelor’s Degree.” Click “Edit Graph” and select the “Edit Line” tab to customize the data by searching for “Income Before Taxes: Wages and Salaries by Education: High School Graduate.” Don’t forget to click “Add.” Next, type the formula a/b and click “Apply.”
Suggested by Diego Mendez-Carbajo.
