2 Statistical reasons you should go to college
And the questions you should ask yourself if you want to be an entrepreneur.
Deciding to go to college is a major one in your life. It will affect your immediate future and finances, as well as your lifetime trajectory. For the first time in a century, college enrollment has decreased in the US over the last few years.
More and more people argue that there are alternative ways to personal and professional success. In this article, I present statistical reasons why you should still consider going to college.
College graduates have higher earnings level and growth
Although money can’t buy us happiness, we need it to provide for ourselves and those we care about. Generally, having more money will make life easier, if not more enjoyable.
In 2021, the median yearly earnings for workers with a bachelor’s degree was $70,000. That is almost $30,000 higher than workers that entered the workforce with a high school diploma. The differences increase with more advanced degrees.
This is the median income for all workers. With limited work experience recent graduates at all educational levels are expected to have relatively low earnings, compared to the overall median.
Since 1979 the median real wage has increased by 15.2% among college graduates. For high school graduates the real wage has decreased by 11.1%. In addition, Connoly and Gottschalk (2006) found that wage growth over time is higher for more-educated workers, suggesting that the difference in median income between high school and college graduates increases with age and work experience. Over the span of 40 years that could lead to a 30% difference in income.
Statistically, we expect college graduates to have a higher yearly income. On average, graduates from a 4-year Bachelor’s degree have accrued $28,000 in student debt (Education Data Initiative, 2021). Coincidentally, that is almost exactly the difference between median yearly earnings for workers with a high school diploma and a Bachelor’s degree. If you devote the entire increase in earnings to pay your student debt, it should not take many years to reduce it substantially.
Beware the survivorship bias of online entrepreneurs
There are many examples of entrepreneurs and content creators earning hundreds of thousands, if not millions, of dollars on Medium, YouTube and other websites. In September 2020 the highest amount earned by a single author on Medium was $50,000. However, only 6% of active authors earned more than $100 that same month!
Top creators take up a large part of the spotlight, but only represent a small minority of all creators trying to make a living online. Most creators make little or no money from their content. Forgetting this majority of “invisible” creators when evaluating your earning possibilities online is referred to as survivorship bias.
We only observe the top creators becoming millionaires, forgetting the majority of creators that never make any money from creating content.
The survivorship bias associated with not attending college can partly be observed in the employment rate for different educational levels. The employment rate includes both employees and self-employed workers. In 2020, the employment rate among college graduates was 82 percent, 13 percentage points higher than for high school graduates.
The employment rate implies that you will not only have higher earnings with a college degree. It is also more likely that you will actually be employed to make that money.
Questions to ask yourself when deciding whether to go to college
The statistics presented above make good economic arguments for pursuing a college degree. Still, statistical averages hide the individual variations across all educational levels. It is obviously possible that you would make more money as an entrepreneur with a high school diploma rather than spending four years going to college, depending on your personal skill set. There may also be substantial variation in the value of a college degree across industries.
We must also remember that money isn’t everything in life and work. Non-monetary benefits may compensate for lower expected earnings, for example more interesting tasks and flexible working hours and location.
If you want to be an entrepreneur, I still suggest that you consider the following questions when deciding whether to go to college:
- Do you believe that statistical relationships presented above apply to your specific skill sets and the industry you want to work in?
- How will attending college affect your chances of becoming an entrepreneur in the future?
- How will going to college affect your ability to create the personal and professional life you want?
