Average Lifetime Earnings Trajectories by Education

Townhall.com ^ | November 13, 2011 | Political Calculations

[Kaslin]

The amount of real income that an average individual will earn at any point of their life can be reasonably determined from the average distribution of annual earnings by age and educational peer group over a period of years.

We previously explored the relationship between age, education and inflation-adjusted earnings for another project, but we limited that study to just the first 25 years of a typical bachelor degree holder's life after they graduated from college. Today, we're widening our net to examine how the average individual's income changes over time, depending upon whether they have less than a high school education, have graduated from high school, have earned an Associates degree or have earned a Bachelor's degree as they progress in life from Age 18-24 through Age 65-69.

Building on what we did previously, our first step was to calculate the percentage of Age 18-24 earnings to determine the basic trajectory that each educational peer group took from 1997 through 2007 with respect to this "starting" income using data from the U.S. Census' Current Population Survey covering each of those years, for those working full-time year-round. After calculating the earnings trajectory for each of these years, we averaged the basic trajectories to produce our first chart.

Next, we converted the mean earnings of the Age 18-24 educational peer group for each year to be in constant 2007 U.S. dollars, then found the average and standard deviation, which we've presented in our second chart in this post.

We note that the surveyed income data for 2002 would appear to be an anomaly, in that the mean incomes of the surveyed population in that year are much higher for those with less than a high school education and bachelor degree holders than what we find in previous or following years. We believe this is a consequence of the aftermath of the economic recession of 2001, which likely resulted in the surveyed working population skewing toward the most highly demanded, and often more highly compensated, professions.

If we omit the annual earnings reported for 2002 for those with less than a high school education and bachelor degree holders, we find the the standard deviation declines from $1,977 to $1,293 for those without high school diplomas or GEDs and from $3,091 to $1,417 for the college graduates. The mean incomes for each group declines from $21,834 to $21,366 for those with less than a high school education and from $35,902 to $35,063 for those holding bachelor degrees. We opted to retain the data for 2002 in producing the charts in this post.

Now that we've calculated the basic lifetime earnings trajectory for each educational peer group, as well as the average "starting" income represented by the inflation-adjusted income of the Age 18-24 surveyed population for each of these groups, we can reasonably determine how the income for an average individual within each group's annual earnings will change throughout their lifetime. Our final chart shows what we found in constant 2007 U.S. dollars.

One pattern we note is that income generally rises up through Age 50-54 for each of the educational peer groups. However, we see a significant drop-off in income earned after this age band. This outcome is most likely the result of more successful, higher income-earning individuals opting to retire earlier than their lower income earning peers.

That likelihood is also suggested by the steeper drop-off in annual earnings that we see for the higher income earning educational peer groups after Age 50-54, especially the highest earning bachelor degree holders and associate degree holders as compared to the lower earning high school graduates and those with less than a high school education. In the case of the highest earning bachelor degree holders, we see the maximum earning point reached roughly five years before the same peak earnings point for the other educational peer groups.

Update : We've developed a tool you can use to project an individual's income at different ages (assuming their income trajectory parallels the average level for an individuals with a similar level of education.) And if you're someone who is conducting demographic research for the Boston Beer Company, or others, we're available for consulting. Just see the "About Political Calculations" in the right hand sidebar at the top for our contact information!...

[TexasFreeper2009]

Relation does not equal causation.

Maybe the smartest people just choose to pursue more education? and they would have earned more money anyway.

If a genius goes to college and graduate school, does having spent another 8 years or more in school make him more likely to succeed? or did it just give everyone else a 8-10 year head start on earning money?

Likewise if a moron barely makes it out of high school, is the fact that he didn’t go on to college what dooms him to failure? or is it the fact that he is as dumb as a box of rocks the real issue?

[econjack]

I get real nervous when a study discards a data point (e.g., 2002) simply because of some untested speculation. Dummy variables can be used in an attempt to quantify such data outliers if need be.

Another important aspect would be the major of the income earner. To me, improved granularity of the data, such as income by major, is always welcomed. You can always recombine the data subsets to get more general averages if that is the point of the study.

[TexasFreeper2009]

To me, one of the most important things about college is ... that it weeds out most of the trailer trash and greatly increases you or your childs chances of meeting a good mate from a similar or higher social status.

This is also one of the main advantages of private schools.

Of course all the above is predicated on them attending a “good” school with other wealthy kids, a junior college is the same as 13th grade at a public school.

I would propose that marrying a quality mate is far more important for lifetime earnings than the education you receive at the university.

[Beagle8U]

While education can often predict an income range in a certain field, it is no replacement for intelligence and ambition.

[tickmeister]

You just stated what I immediately thought. I would like to see a study of life earnings vs. education for various populations of equal intelligence. I would almost bet that an individual with IQ above 125 who went to work directly out of high school would earn more in his lifetime than one who spent 7 or 8 years in college. The same might be true of all other levels of intelligence. It’s hard to make up several years of outgo vs. several years of earnings on the front end.

[SunTzuWu]

I would propose that marrying a quality mate is far more important for lifetime earnings than the education you receive at the university.

That's certainly true for women but what are the men to do?

[Lonesome in Massachussets]

What about all the morons that acquire graduate degrees?

I know of at least one story of a guy with a four year degree who could not qualify to enlist in the Air Force as an E1 because of his score of the AFQT, back in 1980.

Academic achievement coorelates with ambition and ability, but does not cause them. If corrected for ambition and ability, a college degree probably has almost no significant effect on earnings.

[TexasFreeper2009]

now having said all that, I do think that a technical education like plumbing, electrical, hvac, auto repair, truck driving ect could dramatically increase the earning potential of even fairly stupid individuals.

trade schools in other words help the less intelligent earn more than they would of.

[Mouton]

I hate these assessments by education levels. For example, one does not become a high earner doctor directly from high school. I absolutely agree with your comment that education is no replacement for intelligence or ambition. One metaphor I love to employee is if you put a bowling ball in front of the stereo, it does not play music when the stereo is turned off.

[TexasFreeper2009]

I have a masters degree, and honestly, I don’t use anything I learned in college.

The best thing I got out of college ... was meeting my amazing wife of 18 years.

The only other thing I got out of college, was to be allowed to mature more before getting started out in life, this is harder to explain... life has a way of taking over your life :) and before you know it the years a flown by especially after you have kids, one day you wake up and a decade has flown by and you still haven’t made any progress towards your dreams or goals. Going to college gave me the extra time to think and plan exactly how and what I needed to do to achieve my dream. Delaying having children falls into that same category.

[petercooper]

Well the world needs ditch diggers too.

[TexasFreeper2009]

there are many good paying jobs that don’t require people to be very intelligent.

Plumber
Electrician
HVAC
Truck driver

and many others that nearly anyone could do if they wanted to, and all that is needed is a small amount of technical education.

These are good paying jobs mostly because most people just don’t want to do them, and then the laws of supply and demand kick in.

[Beagle8U]

One of my older brothers didn't even finish HS, but was a millionaire in this 30’s. He retired now and and a multimillionaire. You would never know that by looking at him.

A couple years ago he was going to pick up supplies for one of his several businesses, a nursery and landscape co.

Dressed in his usual farmer jeans, tee shirt and straw hat, he stopped at a dealership to look at a new caddy on the way. He finally attracted the attention of a salesman that came out. He asked to start it up and hear it run, and the salesman started it up. ( My brother never got in or drove it)

He said he liked how it ran and would take it. Rather surprised, the salesman told him to come inside and he would “see if he could get it financed for him”.

My brother just looked at him and said...You take checks don't you? If not I can stop at the bank and get the cash in $100 bills. The salesman didn't know what to say, but he learned a lesson that day about judging people by what they wear to work.

[Fightin Whitey]

Lucky you that your college allowed you to weed out from your life all the “stupid” “moron” “trailer trash” like, say, Herman Cain or Ronald Reagan or Clarence Thomas or Thomas Edison or Henry Ford or Abraham Lincoln or Ben Franklin or...well, the list goes on.

Yours is the kind of talk I usually hear out of the smug creeps and crypto-Facists on the left when they talk about their lessers out here among all us rabble.

I grew up poor and my unschooled but highly intelligent and fiercely hard-working parents made damn sure we went off to our little land-grant college where I met my wife, daughter of a poor farmer, like myself the grandchild of immigrants, a great, lovely lady who I know is at least of your brainpower and definitely a lot more heart.

Know what? I wouldn’t trade a bit of my life for your life or certainly your outlook.

Matter of fact, I wouldn’t let you in the back door of my house.

[CowboyJay]

"I would almost bet that an individual with IQ above 125 who went to work directly out of high school would earn more in his lifetime than one who spent 7 or 8 years in college"

In a just world, this would be the case. As is, the lack of a college degree bars people from entry into nearly all the higher earning fields regardless of ability or intellect. And on the flip-side there are hordes of drooling morons earning a pretty good living as low-level drones in gov't and large corporations simply because they have a piece of paper others don't.

It used to be that going into sales used to be one way for sharp people to circumvent college, and still make a good living. But now more and more companies are requiring college credentials even for their sales employees.

[TweetEBird007]

My Dad used to do that out of town and got some low ball prices as a results.

[Jim Noble]

Correlation is not causation.

This guy received a big diploma:

But his head was still full of straw.

[TexasFreeper2009]

It's a simple fact of life that you don't really get to choose who you fall in love with, it just happens.

So you can let your children hang around gangsters and “hope” they don't fall for one of them... or you can isolate your children around other honest, good people and hope they choose one of those.

People choose schools (both public and private) and their homes for the exact same reason.

If you choose to live in a high crime area, and send your kids to an inner city school with gang-bangers, don't be shocked when they fall for one of them or make friends with them, and eventually end up dead or in jail themselves, at which point you will be saying to the news cameras... but... but... he/she was such a GOOD child! they just got mixed up with the wrong crowd.

[Explorer89]

10 years ago when we were having our house built, our mid-20’s year-old tattooed electrician was telling us about the house HE was having built at the same time. Sounded a heckuva lot nicer than mine. He did a great job. People underestimate trades. A skilled electrician has to know his trade AND how to run a business (if in business for himself). I have nothing but the highest respect.