What is the Real Value of a College Degree?

While there are continued debates about the value of a college degree, evidence of the impact of higher education on labor market outcomes is clear. On average, higher levels of education lead to higher earnings. To understand how important this effect is in New Jersey, we looked at the relationship between educational attainment and employment as well as to how well that work pays. And the evidence is glaring.

The adjacent graph shows employment/population ratios in New Jersey for residents aged 25–64 by three groups of maximal educational attainment — residents who earned a high-school diploma, residents who attended college but did not earn a bachelor’s degree, and residents who earned a bachelor’s degree or higher. Unfortunately, this data does not allow for a breakout of associates degrees, though we know that there are a variety of middle-skill jobs that provide good wages without requiring a bachelor’s level education. Employment/population ratios are important indicators of both labor supply and demand, because the portion of a population working reflects not only demand by firms for their services but also how many members of that population are seeking work.

As the chart shows, since the end of the Great Recession, the gap in employment/population ratios between people who earned bachelor’s degrees and those with lower levels of educational attainment has grown. During this time, the employment/population ratio for New Jersey residents holding a bachelor’s degree or higher has risen 3.3 percentage points relative to pre-recession levels. In other words, a higher portion of college graduates are working now than were before the recession. Meanwhile, the portion of the population without a college degree who are working remained below pre-recession levels.

At the same time, wages have fallen for everyone. But the decline was more severe for workers without a college degree. Workers with only a high school diploma saw their incomes fall from the top of the Northeast in 2007 to the middle of the pack by 2017 and incomes for workers with some college but no bachelor’s degree dropped from 2nd highest in the region to 5th.

Real median income for workers with a bachelor’s degree also fell, but wages in New Jersey remained the highest in the Northeast for this group. By 2017, the gap between wages for this group and workers without a four-year college degree was the largest of the nine states in the region.

Addressing this widening gap requires a two-pronged approach to investing in people that increases access to higher education and provides new opportunities for workers without four-year college degrees. The administration’s student-centered plan for higher education, Where Opportunity Meets Innovation, and initiatives like tuition-free community college are opening college to students who otherwise could not attend. Programs like the New Jersey Apprenticeship Network are ramping up to provide the skills necessary to work in today’s fastest-growing industries.

New Jersey has one of the most educated workforces in the nation, and that provides important benefits for companies and workers. However, it is crucial to ensure no one who works hard in New Jersey gets left behind. Investing in New Jerseyans to ensure everyone can build a successful career, through a variety of high- skilled pathways, is critical.