Office of Planning and Budgeting

The College Board recently published “Education Pays 2013: The Benefits of Higher Education for Individuals and Society,” which provides data on U.S. adults’ level of education and its impact on earnings, employment, health-related behaviors, reliance on public assistance programs, civic participation, and more. The goal of the report, the authors say, is to highlight the ways in which individuals and society benefit from increased levels of education. The authors note, “Financial benefits are easier to document than non-pecuniary benefits, but the latter may be as important to students themselves, as well as to the society in which they participate.”

Many old trends continue to hold true. Having a college education increases one’s chances of: being employed, earning a higher income, receiving health insurance and pension benefits, climbing the socioeconomic ladder, being an engaged citizen, and of leading a healthier lifestyle.  These individual benefits translate to larger, societal benefits, including less government spending on public assistance programs, more tax revenue, and greater civic involvement.

A few noteworthy data points about earnings include:

  • In 2011 (the most recent year for which income data is available), the median pre-tax earnings of full-time workers with a bachelor’s degree* were $21,100 higher than those of full-time workers with only a high school diploma.
  • As workers age, earnings increase more quickly for those with higher levels of education. For instance, at ages 25-29, full-time workers with a bachelor’s degree earn 54 percent ($15,000) more than their high school graduate counterparts; but at ages 45-49, they earn 86 percent ($32,000) more.
  • During a standard 40-year full-time working career, median earnings are 65 percent higher for those with a bachelor’s degree than for those with only high school diploma.
  • “Compared to a high school graduate, the median four-year college graduate who enrolls at age 18 and graduates in four years can expect to earn enough by age 36 to compensate for being out of the labor force for four years and for borrowing the full tuition and fee amount without any grant aid.”

The report also provides some interesting facts about participation and success in higher education, such as:

  • Large gaps in enrollment rates and patterns persist, particularly with lower income students. However, gaps between the enrollment rates of black and Hispanic high school graduates and those of white high school graduates narrowed significantly between 2001 and 2011.
  • Although educational attainment rates are increasing, attainment rates and patterns vary noticeably by demographic groups. For example, the percentage of black females ages 25 to 29 who have a bachelor’s degree doubled between 1982 and 2012—going from 12 to 24 percent—whereas the percentage of black males increased from 11 to 16 percent.
  • In the U.S., public funding makes up a smaller percentage of total funding for higher education than in most other developed countries.

* “Bachelor’s degree” means a bachelor’s degree, but not a more advanced degree.

The results of two new surveys released Tuesday reveal some of America’s views on both the future of higher education as well as its role in producing desirable outcomes, particularly career-ready graduates. Under Northeastern University’s sponsorship, FTI Consulting surveyed 263 hiring managers in July as well as 1,000 adult Americans in August.  Here are some of their findings: 

  • Americans continue to see the value in higher education, but are concerned that the system does not adequately prepare graduates for their careers. Respondents ranked “level of education” as the most important factor in determining a job candidate’s success; yet, 62 percent said colleges currently do only a fair to poor job of preparing graduates for the workforce. That said, 79 percent believe their own college education prepared them well.
  • Americans are conflicted about who has the greatest responsibility to train recent graduates for the workplace: employers (36 percent), colleges/universities (29 percent) or the graduates themselves (35 percent). When Americans were asked why U.S. companies are struggling to find good job candidates, the most common response was that companies are not investing enough in training new hires. However, 87 percent of Americans assert that higher education must change in order to maintain an internationally competitive workforce.
  • Americans and business leaders value “soft” skills, like problem-solving and communication, over “hard” industry-specific skills. Most Americans (65 percent) and business leaders (73 percent) believe that, for people on the job market, “being well-rounded with a range of abilities is more important than having industry experience because job-specific skills can be learned at work.”
  • Americans and business leaders agree that experiential learning is highly valuable to students’ careers. Nearly all Americans (89 percent) and business leaders (74 percent) believe that students are more successful in their careers if they have work experience from a field-related internship or job. Both groups agree the most important step the U.S. can take to better prepare colleges students is to broaden the professional work programs available to them.
  • Although most Americans (67 percent) think colleges should adopt new technologies and interactive teaching methods, they have doubts about MOOCs and online degrees. Less than 30 percent of Americans and business leaders believe MOOCs are of the same quality as in-person courses, and only 37 percent of Americans would consider completing a postsecondary degree solely online. However, about half of all respondents believe MOOCs will transform education in the US and that online degrees will be equally accepted by employers within 5 to 7 years.

My take-away from all this, to summarize, is:  Americans and business leaders believe that people on the job market need a college education, some professional work experience, and a well-rounded skill-set and in order to succeed. However, they also believe that colleges, businesses, and the government must play a role in helping students garner those qualifications.

On Wednesday, March 20, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of State General Fund Revenues. Revenue from an anticipated increase in Washington housing permits and real estate excise tax receipts is expected to offset higher federal tax rates and spending cuts than were previously assumed. Overall, revenue projections for both the 2011-13 and 2013-15 biennia remain relatively stable, with a slight net gain of about $40 million across the two biennia. However, this net gain is negated by the roughly $300 million in additional Medicaid caseload costs. The state and its lawmakers now face a $1.3 billion deficit along with court-mandated funding for K-12 education, which could cost another $1 billion. Their upcoming budget proposals will have to reconcile these demands on the state purse.

We anticipate that the Senate Majority Caucus Coalition will release its operating budget proposal sometime next week, while the House will likely release its budget by early next month. Until that time, any specific impact on the UW cannot be assessed.  Please see the full OPB brief for more information.

 

The Wisconsin Education Approval Board, which oversees all for-profit colleges located in the state and any online-learning programs offered to its residents, may require that those institutions achieve specific performance standards in order to operate within Wisconsin. Specifically, that board is proposing to require that at least 60 percent of a college’s students complete their studies within a certain time-frame and at least 60 percent of its graduates have jobs.  Public universities and private nonprofit colleges are not under the board’s jurisdiction and would therefore be exempt from the requirements.

The board already collects and publishes data on its institutions. According to those reports, average completion rates fell from 82 to 59 percent over the last six years and the percentage of graduates who were employed during a given year dropped from 44 to 22 percent (in the same time frame).

The Chronicle reports that the board is basing its standards on what they believe “Wisconsin consumers would find ethical, responsible, and acceptable for institutions choosing to enroll them.” However, for-profit colleges have already submitted letters to the board arguing that the proposed standards are “arbitrary and should not be broadly applied to a diverse set of programs, which often enroll underserved populations.”

While the federal government’s “gainful employment” rule is similar to Wisconsin’s proposal, it is unusual to see a state attempt this type of regulatory system. Some states have increased their requirements for online and for-profit institutions—but Wisconsin’s proposal is especially aggressive. For-profits that wish to operate in Washington must receive authorization from the Washington Student Achievement Council, which considers institutions; “financial stability, business practices, academic programs, and faculty qualifications”—but does not yet hold them to specific graduation or employment standards.

On Wednesday, Wisconsin’s board voted unanimously to postpone a final decision until a team made of board members, representatives from colleges and universities, and State legislators can review the proposal more thoroughly.  The team is scheduled to make recommendations to the board in June of 2013.

On Friday, the National Institutes of Health (NIH) approved a rough implementation plan for a set of initiatives that could affect biomedical studies and the faculty, postdoctoral, and student researchers who conduct them. Three working groups proposed the plan back in June and mean for it to guide, diversify, and improve biomedical research through new grant programs and guidelines.

The biomedical workforce working group recommended that the NIH:

  • Help students prepare for careers by providing institutions with additional grants for training and professional development;
  • Encourage graduate students to complete their degrees on-time by capping the number of years they can receive NIH funds;
  • Urge institutions to financially commit to their researchers by slowly reducing the percentage of NIH funds that go toward faculty salaries; and
  • Support the decision-making of prospective graduate students and postdoctoral researchers by asking that NIH-funded institutions provide data on student career outcomes.

The working group on diversity was founded after an NIH report revealed that black researchers were underrepresented in grant applicant pools and that, when they did apply, they were significantly less likely to receive NIH grants relative to their white counterparts. The group called for the NIH to: 

  • Help bridge diversity gaps by implementing a system of career mentorship “networks” for underrepresented minority students;
  • Support under-funded colleges that have a history of training underrepresented minorities in the sciences by considering them for a “well-funded, multi-year” competitive grant program;
  • Establish a committee to address implicit or explicit biases in the NIH peer review system; and
  • Experiment with completely anonymizing grant applications by removing the names of researchers and their institution.

Lastly, the working group on data and informatics asked that the NIH develop a better framework for information exchange and fund more fellowships and training in statistics and other quantitative areas.

These initiatives may sound familiar as many have been pursued, yet subsequently aborted in the past due to a lack of funding. This time may be no different if Congress fails to resolve the fiscal cliff and mandatory spending cuts that could slash the NIH’s budget by 8.2 percent in the coming year.

Massive open online course (MOOC) providers, Coursera and Udacity, are now offering to sell information about high-performing students to employers who have available positions.

Coursera, which is known for working with high-profile colleges, announced its version of the headhunter service on Tuesday. Already some similarly high-profile tech companies, such as Facebook and Twitter, have enrolled in the service. Once an employer signs up, Coursera provides them with a list of students who match the company’s academic, geographic, or skill-based requirements. If an employer sees a profile they like, Coursera emails the student asking if she or he would like to be introduced to the company. Every introduction costs the employer a flat fee, the revenue of which goes primarily to Coursera. However, 6 to 15 percent of the revenue goes back to whichever college(s) offered the MOOC(s) the student attended.

The Chronicle reports that Coursera’s co-founder, Andrew Ng feels “this is a relatively uncontroversial business model that most of our university partners are excited about.” Regardless, Coursera is giving each of its partnering colleges a chance to opt out of the new headhunter service. If a college declines, any and all students enrolled in its MOOCs will be unable to participate in the job-matchmaking program. If a college accepts, its students will still have the option to personally opt out of the service—either altogether or only for courses they are unable to complete.

Udacity, which works with individual professors to offer MOOCS rather than entire institutions, offers a similar headhunter program. So far, approximately 350 partner companies including Google, Amazon, and Facebook have already signed up.

Neither Coursera nor Udacity was willing to disclose the price of their respective services, but both MOOC providers said they give employers more than just student grades. They also collect and share data on students who frequently participate in discussion forums and help answer questions from their classmates. Mr. Thrun, of Udacity, said employers often find those “softer skills” to be more valuable than sheer academic performance as they can be better predictors of placement success.

As a recent post discussed, if you attend college, you are more likely to earn more money. But, as you might imagine, the financial value of higher education depends on what program you choose and where.

Information on the annual earnings of students from different programs and institutions is exactly what Sen. Ron Wyden, a Democrat of Oregon, and Sen. Marco Rubio, a Republican of Florida, hope to provide. Their recently-introduced “Student Right to Know Before You Go Act” proposes creating a state-based, individual-level data system linking the average costs and graduation rates of specific programs and institutions to their graduates’ accrued debt and annual earnings.

Although useful, Senator Wyden acknowledged that such information is limited and that focusing on financial indicators alone could undermine the importance of liberal arts—whose graduates may not earn large salaries right after college. He stated that the bill’s intention is “to empower people to make choices.” However, “people” include not just students, but policy makers—such as Florida’s Governor Rick Scott who sparked controversy last October when he asserted that state money should go to job-oriented fields, rather than fields like anthropology which, he said, do not serve the state’s vital interest.

Regardless of the bill’s success, about half of the states already have the ability to link postsecondary academic records with labor data. And some, such as Tennessee, have already done so. Here in Washington, the Education Research and Data Center is in the process of connecting certain employment and enrollment data for schools, such as the UW, to analyze in the coming months.

All this begs the question: Is college chiefly for personal economic gain?

A recent report by the College Board highlights both the financial and nonfinancial payoffs of college. Additionally, David A. Reidy, head of the philosophy department at University of Tennessee Knoxville, stated in a recent Chronicle article that four-year degrees, particularly in liberal-arts, are not solely for job training. “The success of the American democratic experiment depends significantly on a broadly educated citizenry, capable of critical thinking, cultural understanding, moral analysis and argument,” he wrote. Philosophy and other core disciplines help nurture such a citizenry, he continued, “And the value there is incalculable.”

The NY Times reports that researchers at the Brookings Institution have summarized why college is worth it. Their chart shows the percent of people at each income level who have various levels of educational attainment. Not surprisingly, the conclusion is that more education opens the gateway to better, higher-paying jobs.

A few findings to consider:

  • Of the Americans who earn over $150,000, 82 percent had a bachelor’s degree.
  • An individual with only a high school diploma is twice as likely, relative to someone with a college degree, to earn less than $40,000 per year.
  • Conversely, an individual with a college degree is 9 times more likely to make over $100,000 and 13 times more likely to make more than $200,000 per year when compared to someone with only a high school diploma.

Although half of all UW undergraduates graduate with zero debt, even when factoring in debt, college is still a great investment. The same researchers developed another chart showing the return on investing in one’s higher education relative to the return on investing comparable tuition money in the stock market, long-term Treasury bills, housing, corporate bonds or gold.

Once again, the numbers show that postsecondary education opens the door to higher-paying jobs and more opportunities.