Caydee Blankenship, Bashir Khan, Corey Okun, and Garett Waters
Caydee Blankenship, Bashir Khan, Corey Okun, and Garett Waters
Continuing your education is important for many reasons such as having job security, improving your mental well-being, or increasing your wages. Overall, this chapter will discuss the returns and benefits of obtaining more education. First, the reasons why economists believe that schooling is beneficial and therefore pay off for students will be discussed. Additionally, even though education creates many private benefits for the individual, there are many benefits for society as a whole when more people are educated. These social benefits will be analyzed and will explain why society is better when more people receive an education. Finally, data from the American Community Survey (2019) is used to estimate an earnings equation to examine the wage differentials across individuals and the return to alternative college majors.
Why Schooling Pays Off
Investments into education can provide benefits to income, increased job satisfaction, and personal and family health. These benefits can persist and manifest even in the next generation, with better results even being seen in the children of those who invest in higher education. These benefits can be a direct result of education, or a result of a result of higher education such as income advantages.
Higher education has a well-established benefit on wages, wage growth, and financial stability overall. For recent college graduates, wages are similar, yet slightly higher in most cases to people of the same age who did not seek additional schooling outside of high school (Houthakker, H. S.1959). However, a gap forms and becomes wider as these two groups continue working throughout their lifetime with wages for both groups peaking around age forty-five. This wage benefit is supported by both the human capital model and screening theory in terms of how higher education can affect wages and worker prosperity in the labor market. According to the human capital model, as workers gain more human capital and skills through education, they become more valuable to employers, and can negotiate for better wages. According to the screening theory, achieving higher education signals to employers that the worker possesses skills greater than those who did not achieve higher education, giving the worker more perceived value to employers. Through both of these theories, an individual who pursues higher education is more attractive to an employer, than a worker who only gets the basic primary education and directly results in a higher wage premium. This improvement to financial stability from higher education comes with several secondary improvements to the quality of life such as health and mental well-being (Ogden, C. L, 2018). The benefits to wages that come with higher education are well understood from a theoretical perspective, and additionally born out historically to cement this concept.
One noticeable way health can relate to education and wages is thr