Phi Beta Cons

The Right take on higher education.

College Degrees and Real Wages


Regarding the study mentioned below, I think it’s important to point out two things about “real wages.” One, there’s some real debate about whether they measure what they’re claimed to, especially considering people seem to be consuming more with their lower “real wages.” Also:

Wages are only part of total compensation — and increasing proportions of that total compensation is taken in the form of fringe benefits. Total compensation has been going up while average real wages have been going down.

Even the decline of real wages has to be taken with a grain of salt. Real wages are calculated by taking the money wages and adjusting for changes in the consumer price index . . . an inaccurate consumer price index is part of the reason for the appearance of declining real wages.

Two, it’s misleading to point out that college-degree wages are declining without mentioning that lower-educated Americans have been seeing the same phenomenon for 30+ years.

In fact, using data between 1973 and 2005, an Economic Policy Institute analysis found: High-school dropouts, and to a lesser degree high-school graduates who didn’t go to college, made less in 2005 than they had in 1973. “Some college” folks saw their wages decline until 1995, but by 2005 they were making more than they had in 1973. The “college” and “advanced degree” groups saw their wages rise nonstop between 1979 and 2005. If graduates’ real wages are going down, it’s a recent phenomenon.

As of 2005, college graduates made about two-and-a-half times what high-school dropouts did. Advanced-degree holders made more than twice what high-school graduates who didn’t attend college did. Some of this isn’t due to the education itself; if you shut down all the colleges, no doubt the high-IQ students who’d have attended them would still make more than their competitors in the marketplace. And when an increasing number of graduates end up taking jobs that don’t even require the degrees, there’s a waste of resources. But I do think there’s a lot of truth to the argument that education is the best way to get ahead, at least for those with the ability to see it through.


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