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The Returns to Education and Training in the Sub-Baccalaureate Labor Market: Evidence from the Survey of Income and Program Participation, 1984-1990 (MDS-765)

W. N. Grubb

The value of formal schooling's power to increase employment opportunities, wages, and earnings has been apparent for a long time. However, conventional wisdom regarding the economic benefits of education may not hold true for every type of education or for every group of students. In particular, the value of education in community colleges and technical institutes and, more generally, the effects of accumulating some education beyond the high school diploma but short of a baccalaureate have been unclear due to a lack of appropriate data. Since a slight majority of students receiving postsecondary education are enrolled in community colleges and technical institutes, and since about one quarter of the labor force could be included in a group described as having "some college," the lack of information about the economic effects of a college education below the baccalaureate level is serious for both students and policymakers.

This monograph uses the Survey of Income and Program Participation, or SIPP, to present a comparison of the estimates of the benefits of education among different levels of education, including the group with some college, as well as those with less than a high school diploma, baccalaureate degrees, and graduate education. The SIPP data has some advantages compared to other data sets, particularly due to the fact that it includes individuals of all ages rather than a small range of ages. It suffers from disadvantages as well, particularly in the lack of information on individual ability or academicachievement. Another disadvantage is the fact that educational achievement is reported by individuals themselves rather than by transcripts. The SIPP also provides the information necessary to construct other independent variables that explain variations in earnings, including race and ethnicity, family background, region of the country, certain aspects of family (marriage and number of children), and several measures of labor market experience.

The results of estimating equations describing earnings as a function of education and other conventional independent variables yield the following results:

The implications of these results for students are relatively clear. Because there is substantial variation in the returns to postsecondary education--depending on how much a student completes and the field of study--prospective students need to be well-informed about the economic consequences of their decisions. Since it is unclear that sufficient information is currently available, especially at the local level where students make their decisions, a recommendation for improved information about economic effects is warranted.

Similarly, state and federal policy has often operated without information about the effects of sub-baccalaureate education. Both states and the federal government have stressed increasing access to postsecondary education, rather than completion; yet there has been little attention to the quality of that education and its subsequent effects. But since many noncompleters fail to benefit from their education, and individuals in some fields of study do not benefit at all, simple access to postsecondary institutions is insufficient to guarantee any advantage in employment. Both state and federal policy should therefore consider the consequences of postsecondary education rather than simple access. Efforts now underway to develop performance measures in vocational education provide one example of the kind of information that would be helpful to state and federal policymakers, as well as to students, in deciding how to improve postsecondary education.

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