William R. Emmons of the Federal Reserve Bank of St. Louis recently described a sharp decline in wealth premiums from college degrees shown in data that ran into the 1970’s and 1980’s. While workers with bachelor’s degrees continued to enjoy a significant income hike from the 1930’s through the 1980’s, the wealth premium associated with earning undergraduate and post-graduate degrees plummeted by the 1980’s. For non-Hispanic whites, for example, having a college degree in the 1930’s was correlated with over three times the wealth of someone with a high school degree. But by 1980’s, the wealth premium had declined to 42%. A similar pattern emerged for graduate degree holders. In the 1930’s, graduate degrees were correlated with five times as much wealth, but that number declined every decade, and by the 1980’s, the wealth premium was only 28%.
These results show the underappreciated importance of student loan debt. People with college and advanced degrees do earn more, but once you factor in their debt, their wealth hasn’t changed all that much.
The data presented only covers those decades from the 1930’s through the 1980’s, and you should be careful when applying this kind of information to your own career decisions. It would be a mistake to conclude that academic qualifications are no longer worthwhile. Aggregated data like this blurs the sizeable differences that may exist between wealth premiums for physics majors, for instance, and those experienced by sociology graduates.
The good news is that career transitions often don’t require obtaining more degrees. So if you do want to make a career change, you most likely won’t need to get a new degree. To learn more about the topic, check out this video on our YouTube Channel.
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