Stability of Employment With High School Diploma vs. Undergrad Degree vs. Grad Degree

Stability of Employment

Education has long been associated with earnings potential. As a person completes higher levels of education, it makes sense that their level of pay also increases. One issue with this trend is that some jobs do not require the higher levels of education because the tasks required do not warrant it. There is also the class structure that it puts in place with intelligence rather than wealth being the commodity that decides at what rank a person should be. The crux of this study is to determine how much education matter for the earnings potential of a small isolated group of individuals. The researcher wondered how much an undergraduate college degree mattered, and whether achieving an advanced degree was worth the added expense. A group of 27 participants answered a survey regarding these questions. The study found that level of education mattered to a great degree and cost of education did not matter to the person attaining the degree because it afforded them a better life style. This was seen as an investment.

Table of Contents

Abstract 1

Table of Contents 2

Statement of Problem 3

Background 3

Rationale 4

Literature Review 5

Methodology 10

Results 11

Conclusion 12

References 16

Appendix A: Chart of Weekly Average Pay by Level of Education 18

Appendix B: Questionnaire 19

Appendix C: Statistical Printout 20

Stability of Employment with High School Diploma vs.

An Undergrad Degree and vs. A Grad Degree

Statement of the Problem

Background

Many problems exist in the United States which are presently under review, but none eclipse the current job market and what individuals feel the present level of incompetence is at the federal and state governmental levels. Due to the extent of the 2008/2009 financial collapse, many people lost their jobs as the initial causes for the crash snowballed into every sector. It can easily be gleaned from the extant information that the housing market crumbled first due to poor regulation of loans and loan speculation, which caused Wall Street firms to buckle. The reason that this happened was because investors were making poor decisions concerning large funds that were financed by inflated loan values. The crisis began hitting other sectors of the economy when banks began calling loans and people began defaulting on them, and the "housing bubble" began collapsing under its own weight. People started to lose jobs because financing became scarce and companies were worried that they would lose money. One of the methods used to ensure solvency is to lay off, terminate or cause workers to except early retirements and this is what happened. Thus, the jobless market expanded, and when many of these people were able to find work it was for less money than their previous employment. The term "underemployment" became a phrase that many are now familiar with.

Of course this is only one of many explanations for a complicated issue, but the fact that many employees were underemployed became a concern. Many of these people had gained college degrees and then experience with a particular company or industry, and they had seen this go for naught when the company or industry found that too many people were employed to sustain the businesses. Also, this meant that white collar workers found themselves unemployed at a higher rate than normal. The reason for this is that white collar workers generally earn higher wages, so they were cut first when the crisis began. However, when the most difficult days of the crisis had ended in 2009, it was found that "the disparity between white-collar and blue-collar unemployment [was] stunning: 4.5% among college graduates versus 10.8% for those with a high-school diploma, and 14.3% for those without one" (Gold, 2010). This level of disparity between levels of education had not been present previously, even though there has always been some level of difference, and this became a worrisome trend.

The disparity between levels of education has become a larger problem in the United States, as have many of the income inequalities, and there seems to be few solutions that are workable. It is understandable that a person who earned a college degree in a field will start at a higher wage, but, at some point, if two people with different levels of education have the same job, they should equal out over time. This does not seem to be the case. As far as this study is concerned, it must be noted that the question is not whether a person with a higher level of education should make more money or not, but whether they do. So, the problem is that a disparity exists and it is necessary to determine, in a small local sphere, how great that disparity is.

Rationale

The disparity of income according to level of education is well documented, but it was necessary to determine how that affected local communities. Taking a small sample size and averaging the income level over this population to determine if it meets national levels or not is the reason for this particular study. Since this is a random sample of a typical suburban area, it should either equal or come close to the national sample. If the disparity is seen in this area, then programs can be put in place that will best solve the issue for this area.

Literature Review

For this literature review and further study, people with a high school degree, undergraduate degree (bachelor's and associates) and graduate degree (master's or doctorate) are considered. The review takes a relatively comprehensive view of the material discussing income disparities at all of these levels.

There has always been a profound difference between people who have attained a college education and those who have not. In past centuries when many people stopped their education after grade school or with some high school and then went to work when they were deemed old enough, college was reserved for the wealthy and the otherwise privileged (Kennedy & Vaughn, 2004). Youth and young adults who came from families that either had agrarian or artisan level jobs were likely going to follow in the same profession. There was much less movement between professions than there is now, and there was almost no assistance, government or otherwise, for students to procure a higher education.

This fact has changed as more people are now able to receive a degree, and the number of degree available has increased dramatically over the past several decades. Mastracci (2004) found that "Although the proportion of the population earning a 4-year college degree has increased over time, nearly three-fourths of the nation's population never earns one. Over one-fourth of the population never enrolls in formal schooling again after obtaining a high school diploma." Thus, even though higher education is more available to the entire population than it ever was, many opt out of completing their degree even if they, at some point began to get one. The reasons for this are as myriad as the number of people entering the labor force, but it is not understood, by much of the population why the degrees are needed in the first place.

Although it is true that advanced degrees and years of schooling are needed for some professions (doctors, engineers, etc.), there is no need for a degree in many that now require one. A researcher made this same point when she found that "many occupations essential to the economy do not require a 4-year degree, including many service-sector jobs and skilled trades" (Mastracci, 2003). Therefore, it would seem that the inflation in the need for education is false to begin with which means that there is no need for a wage disparity, in many professions, between people who have earned a college degree and those who have not. Unfortunately, it does exist.

Researchers have found, for a matter of fact that there exists a startling disparity between workers who have earned an undergraduate degree or higher and a person who has not. According to the chart in Appendix A, after an adjustment for inflation the real disparity is $450 a week between people with a college degree and those who have a high school degree and no college (Strachan, 2011). These are 2006 figures, but there is an even greater degree of separation currently. Wheeler (2005) found the same issue pre-2006 that Strachan found several years later, but another researcher noted that "over a work-life, individuals with a bachelor's degree working full time, year round, earn about one-third more than individuals who do not finish college and earn almost twice as much as individuals with a high school diploma" (Aughinbaugh, 2008). The data that proves the disparity is apparent to the weakest observer, but the cause is what has been debated so vigorously.

The two primary positions in the discussion are reserved for those who are looking at "between-sector dispersion" in the same industry (Wheeler, 2005), and those who see it as a technology gap that affects all industries due to the use of increasingly complex technology (Schleicher, 2009). These two arguments may actually prove the same cause.

Wheeler (2005) argues that "the fraction of workers in the United States holding jobs (defined by 174 industry-occupation cells) in the bottom and top tails of the distribution of average hourly pay increased between 1983 and 1993." The research conducted in this instance was a meta-analysis of studies done within an industry base that looked at how income was distributed among the workers of that industry alone. After examining the individual industries, Wheeler gleaned the above finding. He said that, "This finding, he concludes, indicates that workers have increasingly been sorted into "good" and "bad" jobs, which further suggests that rising inequality has been the product of growing between-sector dispersion" (Wheeler, 2005). Of course, even though the wage discrepancy in this case was more of a factor within a given industry rather than job market wide, Wheeler did acknowledge that the disparity had more to do with new technologies being introduced into those industries than any other reason.

The second researcher who conducted a meta-analysis of similar studies found that it was not within industry variance that accounted for the disparity in wages, but the technology itself. "Among the 30 (OECD) countries with the largest expansion of college education over the last decades, most still see rising earnings differentials for college graduates" (Schleicher, 2009). The earnings increased in this group of studies because it was done on a wider scope than those conducted observed by Wheeler. This was an international study that examined the Organization for Economic Cooperation and Development countries which are have some of the largest economies and worker bases in the world. Among the largest economies, only China is excluded (along with other population giant India). These countries have largest numbers of college graduates per capita, so the study may be slightly skewed from a true international sample. However, the finding that wages increased for those with more education is telling. Schleicher also stated that "an increase in knowledge workers does not necessarily lead to a decrease in their pay, as is the case for low-skilled workers" (Schleicher, 2009). This means that more people worldwide (especially in China and India) are getting college degrees. That should have caused such a global glut that the pay for these individuals would have evened out over time, but it has not. This is true at the same time that wages for people without a college degree are decreasing steadily worldwide.

Thus, since there is evidence that points to multiple causes for the disparity in wages, there is no easy solution. It is equally apparent that if a person continued through graduate school, that they will earn even more over a lifetime. Maki (2009) found that "If examined on a monthly basis (across all employment sectors), the average is a $2,000 difference between doctorate and master's degree holders and a $1,000 difference between the master's and bachelor degree holders." Graduate degrees are desirable because even though they are more expensive, they bring a monthly income increase that will make up for the expense in a very few years. Maki (2009) also found that benefits for advanced degree holders exceeded pay. He said that

"Beyond issues of hiring needs and lifetime earning potential, advanced degrees provide other advantages such as:

* Opportunity to realize full potential.

* Wider employment opportunities and options.

* Visibility as it distinguishes individuals.

* Validation of academic abilities.

* Options for making career changes.

* Opportunity to study with experts in the field"

Since the average worker will change jobs multiple times in the new economy, having an advanced degree means that transition is much easier. This increases earning potential and experience. Companies are also providing added incentives to these advanced degree holders because they represent a large investment and are difficult to replace, thus adding to the income disparity between them and other workers.

Another issue that must be discussed, but is slightly beyond the scope of this research is that women and minorities, even if they have the same degree, continue to earn less than white males. Kennedy & Vaughn (2004) found that "The median annual income for full-time working adults with a bachelor's degree is $14,848, or 28.9% less for women than for men." This is also true for people with disabilities (Appelman, et al., 2012) and older workers, especially those who reenter the workforce (Kennedy & Vaughn, 2004). Wage disparity seems to be a global constant that no one has found an equitable solution to.

Methodology

A five question survey was presented to 33 people who held a variety of jobs. Of the 33, six were rejected due to time in career, time since degree completion and lack of service time in a single defined occupational sector. Survey data was taken from the 27 participants for the survey who ranged in age from 35 to 61. The age was limited to those people older than 35 so that the individual would have had more time to establish themselves in their career. This was especially important for those who had finished an undergraduate or graduate degree. The mean of years since graduation was kept above ten for the same reason. The sample was randomized for factors such as gender, ethnicity and job type. These variables were not important to the final analysis desired, so they were not added to the questionnaire or considered in any part of the study. Of the 27 participants nine had only a high school diploma, 13 had finished a bachelor's degree, and five had a graduate degree in some field. Incomes were based on an estimated five-year average and ranged from $17,000 per year to $126,000 per year. The five-year average was used to determine whether income at that level was stable, and to control for wide variations that may have occurred if the last five years had been taken separately.

The data was then examined using simple statistical measures that allowed the researcher to determine trends in the data. Means and standard deviations were obtained from the raw data and then a small analysis of variance was conducted to provide a more detailed view of differences. The results of the data are discussed in the next section.

Results

The survey and question called for very basic statistical analysis that could easily be done using Excel. The printout with the means and standard deviations of the data are in Appendix C. The five participants who had completed a graduate degree had received markedly larger salaries than the other 22 participants the mean was found to be $68,200 and the average cost of their education was $80,200. The second group, those with a bachelor's degree had a mean salary of $53,000, and a mean education cost of $37,773. The diploma group earned an average of $26,577.78, and had a rather negligible mean education cost of $62.22. The reason that there was an education cost for two of the diploma graduates was because they had paid for a GED when they did not finish traditional high school.

It can be seen from these numbers that, as the literature has revealed, there was a hierarchical yearly earnings structure from graduate degree recipients, to those with bachelor's degrees, and then those with only a high school diploma completed. This data followed the hypothesis of the project, but it was more interesting to look at the standard deviations of the groups. There was not a wide variance for the high school group, but salaries were widely varied for both the undergraduate and graduate groups. This was so especially with the graduate group. This was also true of the education expenses for the groups. This demonstrated that degree type (which was not taken into account in the response) had a greater bearing on the earning potential than any other factor. This is inconsistent with the findings that income disparity is greater within industries than when it is looked at more globally. The cost of education depended on the degree the person attained, the school they went to (and whether it was private or public), and how long they spent in school getting the degree. These factors were consistent regardless whether the person was getting a BS/BA or an advanced degree.

A final calculation was made to control for the cost of education to determine if this evened out the relative earnings potential. Randomly assigning 20 years to the time that it would take to pay off student loans, each mean value of education cost was divided by those 20 years and that controlled mean was subtracted from the earnings mean. Although this did lower the expected earnings of the undergraduate and graduate populations, it did not even them out enough to conclude that the degrees themselves were not worth the expense. This calculation basically confirmed that cost of education was still worthwhile over time.

Conclusion

It is simple to conclude that level of education does increase potential earnings, but there are other conclusions that can be drawn from this study that may be even more important in the long run. Those with only high school diplomas in this group exceeded the national average mean for people with their level of education. This can be explained by the fact that the cost of living is higher here than other places in the country, and that industry in this area provides higher paying jobs to all potential employees regardless their level of educational attainment. This is good for the region of the country that the study was conducted in, but cost of living is another control that could be added and which takes away more from the high school group than the others. Also, taxation was not taken into consideration and this could even out the salaries even more. However, since the disparity was so high, there would remain some difference in potential wages per year.