Having consistent employment makes you more financially secure. Earnings data shows that holding a college degree also equates to higher wages over time as the median college graduate has significantly higher earning power than someone who only completes high school. This kind of earnings boost plays out for recent graduates as well, showing that there are immediate economic benefits in earning a postsecondary degree.
There are spillover effects that come from increased expendable income, as those with higher incomes are able to spend more and put more money into the economy. Higher incomes also result in more tax revenue for federal, state, and local governments.
Simply put, college graduates—through increased earnings—produce an increase in tax revenue across the board. In fact, according to one analysis from The Lumina Foundation, the lifetime value of taxes for a college degree yields the following increases: Increasing the college graduation rate would also directly increase annual Social Security contributions.
Currently, Americans pay 6. More people graduating and earning higher salaries also means fewer people living in poverty—and hence, fewer families who need to rely on local, state, and federal safety net programs. College graduates both pay more in taxes and cost less in tax expenditures due to their reduced probability of living in poverty and needing public assistance programs.
By increasing college completion for this one cohort of students, we could achieve a reduction of nearly 48, people living in poverty. The existence and maintenance of these social safety net programs remain critical to ensuring that our country provides for those in need, however, no one aspires to be reliant on the safety net, and having fewer people in need of social services benefits those individuals and taxpayers alike. Rather than having to invest money on the back end to lift people out of poverty, there should be a strong national interest to instead invest our money and energy on the front end to help more students who enroll in college leave with a quality degree.
Doing so will require Congress to enact policies in its next reauthorization of the Higher Education Act HEA that prioritize completion and other important student outcomes like the ability to repay loans and earn a decent living post-graduation.
Though we did not do this calculation on the institutional level, we limited our dataset to only Title IV participating institutions. Additionally, we calculated this graduation rate by the level of institution at least two but less than four years and four or more years. We used that calculation to determine the impact in each of the metrics that follow. We did not, however, do separate calculations for part-time and full-time students or for first-time or transfer students.
One modification of this graduation rate is how we treated transfer students. We know some students transfer out, but because we lack a federal longitudinal data system, we are unable to understand their outcomes at those other institutions. We acknowledge that this is based on six years while the Outcome Measures looks at an eight year rate, but it is also based on first-time students which have higher graduation rates.
We use this as an estimate recognizing its limitations because we also have transfer and part-time students in the calculation. United States, U.
Download The Benefits To Taxpayers From Increases In Students Educational Attainment 2009
Accessed 1 Oct. High school graduates, by sex and control of school: Selected years, through Accessed 10 Oct. See also: United States, U. Department of Commerce, U.
Download The Benefits To Taxpayers From Increases In Students Educational Attainment
Accessed 20 Oct. For more details, please see the methodology section. Sixty-four percent of graduates from the University of Washington in Seattle stay in the Seattle area, and 57 percent of alumni from the Illinois Institute of Technology work in or around Chicago. At the metropolitan scale, retention rates differ considerably and are modestly correlated with size and measures of worker productivity.
The New York City area exhibits one of the highest retention rates with 70 percent of four-year college attendees remaining in the area.
Detroit, Houston, Chicago, San Jose, and Atlanta also retain at least 65 percent of attendees from four-year schools. On the other hand, Boston retains just over half 53 percent , and the Washington D. While most policy leaders and voters might assume that more education is better for the economy, the empirical relationship between economic growth and a highly educated population has been unclear.
This report aims to simplify that relationship by understanding one direct channel through which education boosts the level of economic activity in an area: consumption. This should by no means be regarded as a comprehensive assessment of the public benefits to the economy of education. I have not attempted to consider how education affects government savings, through channels such as criminal behavior or health. I have also not attempted to estimate the role of education in entrepreneurship and innovation, which is likely very large and valuable.
Nonetheless, these estimates provide some sense of a minimum benchmark for how education affects a local economy, and they are non-trivial in magnitude even with these caveats. This analysis also shows that college quality has major implications for the extent to which higher education boosts economic activity. Thus states and their voters have a very clear incentive to raise the quality of their colleges, with respect to how they affect earnings.
In my previous work , I discussed ways of doing that—through increasing the market value of course content and skills taught; investing in a high quality teaching staff, offering financial aid, and implementing programs that will boost retention and graduation. As I and others have argued, increasing transparency about student outcomes at particular colleges is one potential way to enhance college quality.
With those data, a student could more easily choose to attend a college that results in a high salary. Ideally, the public would also have access to data on the quality of learning at a college, but methodological challenges mean that information is unlikely to be available anytime soon. Additionally, one could imagine state or federal policies that go further in inducing colleges to prepare their students for at least a modicum of economic success after attendance.
For example, colleges could be forced to pay back the federal government a portion of what has been lent out to their students when those students default on federal loans. This would offset some of the risk to taxpayers, while imposing it on chronically bad-performing colleges. Kelly of the American Enterprise Institute, suggesting the idea has bipartisan support. In order to avoid punishing colleges that admit the low-income students most likely to default, the portion of defaulted debt owed to the federal government could be adjusted based on observable student characteristics, such that it is higher for the students least likely to default and very low for those most likely to default.
In short, each school could receive a predicted default level, using similar methods as my value-added research, but only have to pay back the federal government for the difference between the actual and predicted defaulted amount.
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The author would like to thank Brad Hershbein and Alan Berube for very helpful comments on an earlier draft. To do this, I convert the percent of value added to earnings into a dollar amount by multiplying it by median earnings at each college. This accounts for the fact that median earnings are sometimes low in high value-added colleges with very low predicted earnings. I use the median rather than mean because the former is not influenced by extreme outliers in earnings, which are probably more attributable to individual characteristics and not the college itself. Measuring the effect of education on economic growth Many economists have noted the high correlation between regional economic growth and higher educational attainment, which can be observed in the recent rise of metropolitan areas like San Jose, Austin, Washington D.
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