Technical Education at a Community College Improves Graduates’ Future Earnings

As the country has emerged from years of high unemployment, labor advocates have refocused their attention around wage trend issues. The fact that the typical American’s wages have grown modestly or flat-lined since the 1970s is of particular concern. Policymakers, such as President Obama and Secretary of Education Arne Duncan, often tout education – particularly technical and skilled education – as the best way to turn these wage trends around.

The antidote to an uneducated workforce is frequently said to be increasing four-year college graduation rates. However, many students cannot, or choose not to, pursue this path. Recently, community colleges have been in the spotlight as a more affordable alternative to four-year colleges. Last July, President Obama introduced his proposal to make community college free for all individuals attaining certain educational benchmarks.

Many community colleges offer Career Technical Education (CTE) programs to meet new labor force demands for skilled labor. These programs often provide industry certification and licensure training, as well as associate degrees, for many growing fields and occupations. However, limited understanding exists about the long-term income gains from this type of education.

In a new National Bureau of Economic Research Working Paper, Ann Huff Stevens, Michal Kurlaender, and Michel Grosz investigated the return on various CTE programs in the California community college system. Comparing academic records to administrative earnings records from 1992 to 2011, they tracked community college graduates and found substantial benefits from CTE degrees. After completing the program, graduates made 12 to 23 percent more than they had made before the training. The largest gains were found in the healthcare sector, where average returns were as high as 36 percent. This makes sense, as healthcare spending and employment grew substantially over this time period. Outside of healthcare, the authors estimated CTE program returns ranging from five to 10 percent for programs like Business/Management, Information Technology, and Public/Protective Services.

The authors performed this study by linking administrative record data from the California Community College Chancellor’s Office (CCCCO) to earnings information, after graduation from these programs, in California’s unemployment insurance system. Once linked, the authors separated the effects related to demographic and individual-specific factors, including income prior to attending a CTE program. Individuals who did not complete their programs were also included to estimate the gains from attending but not graduating. Across these different methodologies and control groups, the authors found approximately consistent returns on these CTE programs.

Expanding on these average gains by job type, the authors found considerable variation within programs. For example, while the largest gains were in the healthcare sector, the payoff of individual programs and certificates within healthcare range from negative eight percent to 50 percent return. This variance existed across job sectors, though the vast majority of these programs showed positive returns.

These results are critical to understanding what community college and CTE programs can mean for students who are not obtaining four-year degrees. While real income gains are shown across many fields, the variance of program performance is notable for individuals making enrollment decisions. These returns are not universal, and healthcare programs absorb large shares of the headline return. Given the growth of healthcare expenditures from 1992 to 2011, and the subsequent slowdown in healthcare expenditure growth, it is uncertain whether these types of returns will persist into the future. Continued monitoring of program performance in the labor market is critical for higher education administrators, as they attempt to educate a workforce in a dynamic labor market.

California Community Colleges is the largest public higher education system in the nation. Its 2.6 million students are a large portion of the nation’s workforce. Information about the real returns on the commitment of time and money can show students that attending these programs is a prudent investment in their own futures. If these programs are as critical to the future of the workforce and our nation as many experts would suggest, showing potential students how education can pay off could be key in boosting enrollment numbers and stimulating widespread wage growth.

 

Article Source: Career Technical Education and Labor Market Outcomes: Evidence from California Community Colleges, Huff Stevens, Ann; Kurlaender, Michal; Grosz, Michel, National Bureau of Economic Research, 2015.

Featured Photo: cc/(US Department of Education)