Predicting Future Earnings Based on Education & Goals

Instructor: James Walsh

M.B.A. Veteran Business and Economics teacher at a number of community colleges and in the for profit sector.

There is a strong relationship between educational level attained and future earnings. There is also a relationship between future earnings and career goals as evidenced in the choice of college major. We will explore both in this lesson.

Off to College

The big day has finally arrived, the family SUV is packed and Eric is heading off to college! He isn't quite sure of what he wants to do with his life yet, and he will be taking general education classes to start out.

Eric is aware that more education generally leads to a higher paying job in the future. But what he isn't aware of is that, by the very act of enrolling in an institution of higher learning and attending classes, he has already increased his expected future earnings. According to the Bureau of Labor Statistics, the average student with some college on their resume, even if they didn't graduate earns about $39,000 while the average student with only a high school diploma makes about $36,000. Attending classes at Tiger State University will be a very profitable activity for Eric!

Just attending classes will improve ones future earnings
University 2

The Link Between Education Level and Earnings

The link between education level and earnings has never been stronger, and the difference in earnings between adults with a college education and those without continues to widen. During the years 2007 to 2016, the average hourly wages for college graduates increased by 4.2% while wages for those with only a high school education actually declined by 1.6%. The payoff for getting that college degree just keeps getting better. The table below shows just how strong the link between education level and earnings is:

Education level Yearly earnings
Professional degree (Doctor, lawyer) $90,740
PhD $86,528
Masters $71,760
Bachelors $60,112
Associates $42,588
High school $35,984
Less than high school $26,208
Source: US Bureau of Labor Statistics

Each level of education completed not only adds to a student's skills but also signals the ability to plan ahead and meet deadlines. Employers value those traits and pay for them with real money!

Earnings and Career Goals

Eric's sister Erica has approached the future a little differently. She has wanted to work in healthcare since she was very young, but didn't care for the gory stuff she would see in operating rooms. Erica came to love science and chemistry in high school and when she learned about a career as a pharmacist, she became very excited. That would be just what she was looking for! She became narrowly focused on her goal and looked into colleges with great pharmaceutical science programs.

Erica's friend, on the other hand, wants to work with troubled young people and be a social worker. It promises to be a rewarding career, but the fact is that she won't make nearly as much money as Erica will. Their friends whose goals do not require a college education will make even less.

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