Education Is Biggest Determining Factor For Earning Potential

level of higher education determines earningsIt's long been known that more education means more earnings for American workers. But a new report from the federal government shows just how stark the difference is among workers, depending on their level of education.

The survey reveals that, for every educational hurdle they cross, workers' annual earnings increase significantly, with the exception of professional and doctorate degrees.

In a report released this month by the Census Bureau, data show a strong correlation between education and earnings power.

Those holding bachelor's degrees, for example, earned a median $42,783 annually, according to the American Community Survey, which includes data from 2006 to 2008. That's about double the yearly earnings of workers with only a high-school diploma ($21,569).

But workers needn't hold a bachelor's degree to get a leg up. A two-year associate's degree or even just some college courses were instrumental in helping boost workers' wages, according to the report.

Those with "some college" earned about 27 percent more than those with a high-school diploma, while those holding associate's degrees earned about 51 percent more.

The survey data show little difference between the annual earnings of those workers who had little or no education and those who attended some high school but didn't graduate. Both earned about $11,000 a year.

But the data also showed that those with the least education were also much more likely to be unemployed, with 35 percent of high school dropouts reporting that they didn't work. That's only slightly better than the 37 percent of workers, with a grade school education or less, who said that they were unemployed.

By contrast, 22 percent of high school graduates said that they held no job, while 17 percent of those with "some college," 14 percent of workers with associate's degrees and 12 percent of college graduates with four-year degrees, were without work.

The Census Bureau notes that its survey doesn't take into account the kinds of occupations that people worked. But its data collection efforts are moving that way. The agency said that it may be able to examine the earnings power of bachelor degree-holders depending on their field of work, based on information it began gathering in 2009.

The government report also notes that the educational level of Americans has risen steadily during the last 70 years.

In 1940, according to Census Bureau data, 24.5 percent of people aged 25 and over had at least a high school diploma. In 2008, 85 percent of this group had at least a high school diploma, and 28 percent had a bachelor's degree or higher. In addition, 10 percent of people aged 25 and over had advanced degrees.

Beyond education, the data also showed disparities among the sexes and within racial groups. Median annual earnings for working-age men totaled $36,422, while those for women barely topped $20,000. The data noted that there were about 1.1 million more women of working age (25 to 64) than men.

Within racial groups, working-age whites not of Hispanic origin recorded the highest annual mean wages of all Americans, with annual earnings of about $31,500. Those of Asian descent weren't far behind at $30,265.

Other ethnicities, however, earned much less. Working-age Hispanics reported annual median earnings of about $20,000, while blacks earned $21,239 and those claiming "Other" as their racial identity made $21,700 a year.

Age, too, played a part in how much Americans made. The data showed that the youngest workers (25 to 29) made the least, with median annual earnings of nearly $23,000. Wages then rose about 21 percent in the next segment -- those aged 30 to 34 -- and then again by 12 percent for the next group of workers, aged 35 to 39.

By age 40, however, workers' earning power flatlined until age 55, when it fell about 16 percent. By the time workers reached retirement age, wages dropped dramatically. The Census Bureau data showed median earnings of just $9,272 for those 60 to 64.

The Census Bureau cautions that the data shouldn't be viewed an estimate of how much workers can expect to earn during their lifetimes. Still, it said, for the most part education is the biggest determinate of how much someone will earn -- more than age, sex or ethnicity.

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