Yes, College Is Still a Good Investment

A four-year degree still pays dividends—but now’s a great time for young people to snap up some on-the-job experience, too.

Students of New York University celebrate graduation at Washington Square Park on May 19, 2021 in New York, United States. (Photo by Liao Pan/China News Service via Getty Images)

ANOTHER GRADUATION SEASON is in the books. Some students have finished high school and are thinking about their next steps while others have just finished college and are wondering if it was worth it. They should rest easy: A new study by Harvard economist David Deming shows that college education remains a worthwhile investment for long-term economic returns.

Using data from the National Longitudinal Survey of Youth from the Bureau of Labor Statistics, Deming found that college graduates generally earn significantly higher wages throughout their careers compared to those without a degree. The “college wage premium” grows substantially with age and work experience, even when adjusted for cognitive skill levels. Those who have diverse work experiences and higher levels of education see compounding skill and wage growth across their working lifetimes.

The novel aspect of Demin’s study is the way it connects wage growth to both education and the number and diversity of job experiences, which Deming calls “mobility.” Both before and after they graduate from college, higher-earning workers tend to try out different jobs, especially in the first two years post-grad, before settling into long-term occupations. This “job-hopping” helps younger workers gain experiences and skills that, over time, lead to higher-paying opportunities, especially once they decide on a career track. Those with less education are less mobile in terms of varieties of jobs and therefore have fewer chances to expand their skill sets.

The research also sheds light on “occupational sorting”—the process by which workers with different levels of education sort themselves into career fields. Not surprisingly, college graduates lean toward professional occupations that require higher levels of ongoing adaptation within the work environment as job demands increase. In other words, those starting with higher levels of experience and education tend to gain new skills faster, and the market rewards that learning through higher wages. One step-up begets the next, and nothing succeeds like success. Conversely, workers without college education often end up in roles with fewer on-the-job learning opportunities and lower growth prospects. This occupational sorting, according to the study, accounts for at least 50 percent of the college/non-college wage growth differential over a career.

There are a couple lessons to draw here. First, at least in the “rearview mirror” of this study, four-year bachelor’s degrees still return much more than high school diplomas on average. If you’re wondering whether you can benefit economically from college, the answer is very likely yes, especially looking back from retirement, at which point a college degree will have out-earned a high school diploma by more than a million dollars.

Second, whether an individual goes to college or not, work experiences really matter—perhaps especially for those who don’t go on to college. This is a critical insight given the declining proportion of teenagers who hold jobs. Learning the habits and norms of the workplace, along with technical and interpersonal skills employment requires, is an essential part of building a foundation for the future.

Bottom line? If you’re a high school student, don’t take the summer off; find a job, earn some money, and learn some skills. The U.S. economy still has roughly twice as many job openings as unemployed people, so now is a great time to find work. Future-you will benefit from even a basic, monotonous, physically demanding, or otherwise unappealing job.

College students should, when possible, also combine study and work to help keep student loan debt under control, apply what they are learning on campus to the workplace, and gain perspective on what they want (or don’t want) in a career. Deming argues that, as a side benefit, intentionally focusing on education and work experience, if encouraged through policies that promote early work, could also raise productivity across the economy. Everybody wins from work.

No study can predict the future, and past performance is no guarantee of future returns. Generative artificial intelligence holds the potential to scramble the calculus around education. According to the most recent estimates, AI will likely have more impact on jobs that require higher levels of education, an inversion of past chapters of automation, which tended to affect blue-collar work more than professional work. The only real way to mitigate that risk is to commit to life-long learning. In the immediate term, that means plunging into the world of AI (as a user, if not a scientist) to gain a functional understanding of this rapidly evolving technology and the principles and systems behind it. Not everyone needs to become an AI or data scientist, but familiarity with how to use AI effectively will be a major skill in the labor market going forward. In the land of the blind, the one-eyed intern is king.