College enrollment is down, which is bad for both students, whose earning trajectories are negatively impacted, and schools, which depend on tuition fees to stay open. But it’s increasingly bad for businesses as well.
A study from the Federal Reserve Bank of Boston finds that men without four-year degrees are dropping out of the workforce in higher numbers than any other group. And social status is a big part of the reason why.
“For many workers, a job not only offers financial security, it also affirms their status, which is tied to their position relative to their age peers and many social outcomes,” the study reads. “Compared with college-educated men, non-college men have experienced a much steeper fall in relative earnings as well as a more sizable rise in their labor force exit rate.”
That earnings gap is considerable. Since 1980, non-college educated men have seen their pay levels fall 30% compared to the average earnings of other workers in their demographic. Weekly earnings are down 17% among non-college graduates. Those with secondary education have seen an increase of 20%, after adjusted for inflation, says the Fed.
The study did not look at the impact on women who did not have a four-year degree. However, it did note that women have not seen the same level of wage decline based on their education.
Those lower income levels impact the worker’s social status, says the report, which is leading to the dropouts. The study found that over the last 40 years, the earnings decline increased the likelihood of people in that subset leaving their jobs by almost half a percentage point.
Most likely to be affected by this perceived impact to social status (and, thus, to leave their jobs) were younger white men, the study reports. As workers get older, though, the correlation between relative earnings and labor force exits begins to decline. That could be because older workers care less about their social status and focus more on their own lives.
Researchers have been studying this workforce decline for decades. Previous studies found that changes in real wage rates did not sufficiently account for the magnitude and persistence of the workforce decline. Social standing, including marital status and job satisfaction, played a role as well.
Some workers, though, realize the disadvantage they face and opt to leave the workforce to pursue a degree or look for other opportunities to increase their skills and earn wages comparable to people who have a four-year college education.
“If the increasing wage gap between high and low earners directly or indirectly affects men’s aggregate labor supply, wage inequality might have carried wider implications to the economy than previously believed,” the report reads.
That wage gap between college and high school graduates has never been higher, either. A separate report from the New York Fed finds the median annual wage for a full-time worker between the ages of 22 and 27 with a high school diploma is $30,000.
For a full-time worker with a bachelor's degree, it's $52,000. And the return on investment for a college degree is worth as much as $951,000 in increased earnings over a lifetime.
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Chris Morris
Chris Morris is a veteran journalist with more than 30 years of experience, more than half of which were spent with some of the Internet’s biggest sites, including CNNMoney.com, where he was Director of Content Development, and Yahoo! Finance, where he was managing editor. Today, he writes for dozens of national outlets including Digital Trends, Fortune, and CNBC.com.
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