It’s commencement season at private nonprofit colleges across the state; it started in April at Augsburg University and ends in June at Carleton College. As students gather with their families for these ceremonies, they mark the significance of this threshold moment — and leave as graduates.
Altogether more than 9,000 students will earn a bachelor’s degree from Minnesota private colleges this academic year. For the time they’ve put into learning and building their skills, these graduates stand to benefit financially and the state reaps rewards as well. Yes, graduates see numerous benefits, ranging from improved health to increased civic engagement, all with resulting payoffs for the broader community. But the topic of financial returns is an area of frequent focus.
Financial benefits to grads
One indication of the importance that employers place on bachelor’s degree holders is what they earn in terms of a wage premium, explained Robert Hoffman, assistant professor at The College of St. Scholastica, School of Business and Technology. And he sees it growing. Looking at the average earnings of Americans aged 25-34, those with a bachelor’s degree earned 49 percent more than those with just a high school degree in 1995. By the mid-2010s that gap grew to 60 percent or higher.
After past economic downturns, that gap has shrunk, Hoffman noted. But that’s no longer happening after the most recent recession, given that many jobs including in manufacturing have disappeared. “Even as the economy recovers, I don’t expect the high school-only educated workers to see much of a wage increase,” he said.
“The fact that college educated workers are being paid so much more than those with just a high school degree,” he said, “it shows the value employers have for college education.”
Think about that 60 percent wage premium as an annual return after investing the time and money to go to college and earn a bachelor’s degree, Hoffman said. “That’s what college represents,” he said. “You’ll never get that kind of return in any other kind of investment, whether investing in the stock market or buying a home.”
Or consider a recent analysis of who has a “good job,” defined as making at least $35,000 for those under 45 and $45,000 for older workers. Data from the report from the Georgetown University Center on Education and the Workforce showed that in Minnesota, the majority of these so-called good jobs are held by those with a bachelor’s degree or higher.
Another sign of the importance that employers place on bachelor’s degree holders is that they have a lower chance of being out of work. This January, for example, the unemployment rate for those with bachelor’s degrees or higher was 1.5 percent in Minnesota, according to a Minnesota Private College Council analysis of Census CPS data. That compared to an overall Minnesota unemployment figure of 3.8 percent.
“When you think of one of the worst economic downturns since probably the Great Depression, the peak unemployment in the United States for college educated workers in 2010 was 5 percent compared to an overall unemployment rate of 9.6 percent,” Hoffman said. “That shows that the degree puts you in a good situation when the overall economy is not in good shape.”
Looking at what the economy needs
Some policymakers and commentators seem to want to emphasize technical or vocational education. But Hoffman sees that as a mistake. “It’s not like there’s no path otherwise than a four year, but for the overwhelming share of people — when you think about employers wanting to find employees with flexibility, ability to respond to new challenges — a bachelor’s degree is going to be helpful.”
Consider just the increase in automation and how it will effect employment opportunities. “The jobs of the future will be in creative problem solving, synthesizing information and finding meaning in data,” said Peter Frosch, vice president of strategic partnerships at Greater MSP, the regional economic development partnership. “A bachelor’s degree is about learning how to think, not just learning to do something, and that’s critical.”
But this is not an either-or proposition: All post-high school education options contribute to our economic prosperity, Frosch said. “We need to sidestep a false choice over what is most important.” The regional indicators that Greater MSP tracks include the share of the population with an associate’s degree or more education as well as the share with a bachelor’s degree or more education.
Looking ahead a couple years, the broader Twin Cities region is looking at a serious 100,000 employee shortfall between supply and demand, Frosch said. About one third of those jobs are ones that will require a bachelor’s degree.
And right now we’re not doing well enough on “degree density,” one of the things that matters most for our regional prosperity, Frosch said. With 41 percent of the population in the broader Twin Cities holding a bachelor’s degree or higher, we rank sixth out of 12 peer markets. When businesses are deciding where they should locate or grow, the Twin Cities will never win on important factors like the weather or taxes, he said. That means we need to over-perform on educational attainment — and we’re not.
As for the supply of graduates with bachelor’s degrees, private colleges are key. The Greater MSP indicators include the average six-year graduation rate for bachelor’s degrees in the region, which is at 63 percent. But that rate is below the four-year grad rate at our institutions, which ranks first in the state and the Midwest.