Do Associates Degrees Increase Earnings By $23,000 A Year? (Absolutely NOT) -Action Economics

This past week Governor Gretchen Whitmer was in Benton Harbor talking about housing and further education. She is proposing for the State government to fully cover tuition for all high school graduates in Michigan to be able to pursue an Associates Degree at Michigan community colleges at no out of pocket cost to them. In her remarks, she stated

“If you get an associate’s degree, you can earn $23,000 more a year. The best paying jobs today, and in our future economy, require some education after high school. So, we must support our kids from pre-K through post-secondary to prosperity.”

The next day Al Pscholka, the current Executive Director of Government Affairs and Community Relations of our local community college, (and formed state house member) echoed her comments stating “Whitmer was correct that people with associates degrees earn $23,000 more a year.”

When I heard this my first thought was disbelief, as I know many recent high school grads who are earning $35,000 to $40,000 a year, and $23,000 over that would be $63,000 a year, which is right around the median earnings of people with Bachelors degrees. I also recall when I earned my Associates degree in 2006 and could not find any job at all. Granted, that was almost 20 years ago, and Michigan was in a single state recession that then dragged into The Great Recession of the whole country which Michigan experienced longer and deeper than the rest of the country. I decided that I needed to do some digging into the numbers, with having a recent high school grad and another son who will be graduating high school in a couple years, knowing the details will certainly be beneficial.

Median Earnings By Educational Attainment:

According to the National Center for Education Statistics, the median annual income for full time, year round workers between the ages of 25-34 in 2021 was:

Less than high school: $32,500
High School completion: $39,700
Associate’s Degree: $45,000
Bachelor’s Degree: $61,600
Master’s or higher: $74,600

Yes this statistic is slightly dated at 2 years old and is a national statistic vs. a state level statistic. This study is showing that people with an associates degree typically earn $5,300 more than people with a high school diploma when working full time. This is only a $5,300 increase, only 23% of the number claimed by Whitmer.

Then we need to ask the question that did the degree cause the increase in earnings, or are people who are motivated enough to seek an Associates degree and put in the effort to do anything to increase their earnings potential, more likely to earn more? Is it possible that the same people if they hadn’t pursued a degree would have become outliers in the High School graduate data set? $5,300 a year equates to $2.65 an hour over a 2,000 hour year. What’s really interesting to me is that even the difference between High School completion and a Bachelors Degree is less than the $23,000 number our Governor threw out at a $21,900 increase for earning a Bachelors Degree.

Median Vs. Averages:

I strongly believe that median is a far better indicator of reality than average, as averages can be greatly skewed by people at the very top. The median is the number in the middle when all people are lined up lowest to highest, while the average is the total of all the numbers divided by the total number of people. If there are 4 people in a room who earn $40,000, $50,000, $50,000, and $60,000 and Jeff Bezos walks in, the median income stays constant at $50,000 , while the average goes up to hundreds of millions.

This is also why wealth measurements using averages and medians are so disparate; the median net worth for someone in their 30s is $34,691, while the average is $277,788; the top 10% greatly pull the average up. The U.S. Census looks at average income for all Americans by education level (not sorted by age like the study above). The averages paint a better story for selling the value of higher education. This is largely because further education at the median level has muted returns, but for the top 5% to 10% the ceiling on earnings is greatly raised.

Average Income In The US By Education Level (U.S. Census)

High School completion: $39,976
Associates Degree: $51,161
Bachelors Degree: $80,478
Masters Degree: $98,268

Even looking at averages, which as I stated above are a terrible indicator of expected results, the total increase for an associates degree is $11,185, still less than half of the $23,000 number given by our Governor.

Where Gretchen’s $23,000 Increase For An Associates Degree Came From: (Lying With Statistics):

After some more digging I finally found a source that seemed to agree with Governor Whitmer’s assertion that an Associates degree increases earnings by $23,000. From “MI School Data” There is a Median Annual Wages by Educational Attainment chart for 2023 that states that wages after 1 year of attainment for each level of education are as follows:

No High School Diploma: $12,600
High School Diploma: $20,200
Associates Degree: $43,700
Bachelors Degree: $47,200
Masters or Higher: $66,100

Ok, so these numbers are striking. They show high school graduates and non graduates with far lower earnings than the other studies we looked at. They also very interestingly show that the difference between an Associates degree and a Bachelors degree is almost non existent. Earning a Bachelors degree after an Associates degree only increases earnings by $3,500. This is a massive indictment against Bachelors degrees as the tuition for an associates degree is roughly $8,000 and increases income by $23,000, while the tuition for the next 2 years to earn a Bachelors degree is $50,000 and increases income by only $3,500. I’m obviously very much against “The College Industrial Complex” and you will not find a better argument for not going for 4 year bachelors degrees than this…However these numbers are not a mirror of reality.

So something is wrong here. In Michigan the minimum wage is $10.10 an hour and the value given for someone earning a high school diploma is $20,200 EXACTLY 2,000 hours at $10.10 an hour. This “study” is showing that the average high school graduate 1 year out of high school is working 2,000 hours a year for minimum wage. I live right outside of one of the most economically disadvantaged cities in Michigan and virtually no entry level jobs are paying only $10.10 an hour. My son who is 15 and just started high school is earning $10.10 at a restaurant that has massive trouble hiring any adults at $12 an hour.

It looks like the data set being used came from surveys of school districts and colleges across the state. Apart from potentially just saying all high school grads earn minimum wage, the only other factor here could be hours worked per year. If the people with Associates degrees are working more hours than the people with High School Diplomas and High School drop outs, then the numbers really don’t matter because they aren’t apples to apples. It isn’t the degree that is making the difference it is that the majority of people with the degrees are choosing to work full time jobs while many people with lower education are choosing to work less. Yes I am saying choosing because there are job openings everywhere. At $16 an hour, working full time results in $32,000 a year. Most employers above fast food are starting out at around $16 an hour for high school graduate positions in southwest Michigan.

It is highly likely that this study is including high school grads who are actively choosing to work very part time positions, while anyone who just earned an associates degree is likely to be working full time. That is the only way the math works. The study states that “Students are included if they received their high school or postsecondary education from schools who report to CEPI and are currently employed in Michigan.” When sorting the data set by wages, it shows 5,621 people reporting under $10,000 in earnings, indicating they are working less than 1,000 hours a year at minimum wage. It is intellectually dishonest to compare earnings of people working vastly different amounts of hours by education level. Education is not the primary driver of the discrepancy being shown in income, hours worked is.

So the first lie is we are comparing everyone, regardless of hours worked, which skews the high school graduates and high school drop out data downward massively. The $20,200 figure for high school grad earnings is based off of many people who are part time employees, while the figures for Associates ad Bachelors degrees have a much higher percentage of full time employees.

Lake Michigan College’s Associate Degree Earnings:

What about all these people with Associates degrees earning $43,700? Lake Michigan College, which is the community college 2 miles down the road from me that Al Pscholka works at, is included in the data set. The data reported shows for Lake Michigan College graduates with Associates degrees 1 year out of college in 2023 average earnings are:

Ages 18-24: $34,300 (52 people)

Ages 25-34: $42,800 (60 people)

Ages 35-44: $66,700 (24 people)

(no age data reported for higher age groups)

The average weighted income across this entire dataset is $43,767, which lines up perfectly with the numbers reported in the overall study looking at all recent Associates degree grads, which provided the $43,700 figure. While this figure is a real statistical point, it is being sold disingenuously because the age group they are targeting are not making the income being sold upon graduation.

What you have skewing these numbers upwards is largely age. It is very common for adult students in established careers to attend community college to earn a degree. Older people tend to earn more money as they have more work experience and opportunity to have moved up in workplace hierarchies. What this data shows is that graduates who earn an Associates degree straight out of high school, who are 18-24 are earning on average $34,300 a year, full stop. The problem is that these graduates are earning roughly the same amount of money my high school graduate who took an entry level full time job at Walmart grocery shopping for other people is. This is a pay rate of $17.15 an hour across a 2,000 hour work year.

This data when adjusted for AGE is showing that there is NO benefit to earning an associates degree because there are plenty of jobs available to high school graduates that will pay $16 to $17 an hour.

So the 2nd lie is that students who graduate with an Associates degree out of high school will earn $43,000. The data lies by age, it is graduates who have a career and then earn an associates degree who are older who are earning more money. There is NO DIFFERENCE between a high school graduate and an Associates degree graduate between the ages of 18-24 if both are choosing to work full time. It is cruel to tell our children that they will improve their income by $23,000 a year by getting an Associates degree, when recent Associates degree graduates in the 18-24 age range earn $34,300. Obviously a high school grad working full time earns far more than $11,300. Many jobs are paying $16/hr + ($32,000/yr) that do not require any college, and it is difficult to find any except fast food paying under $14/hr ($28,000 per year). For someone with a high school diploma who is willing to work full time and can pass a drug test, with no criminal background, the pay is right in line with someone of the same age with an Associates degree.

I could not find any actual study that shows the actual data for full time workers with a high school diploma with the age range of 24-35.

Job Listings; Southwest MI:

Williamson Employment: St. Joseph, MI: Parts assembly, no experience necessary willing to train. Starting pay $18/hr after 90 days increase to $19/hr.
Health Care Lead: Spectrum Health: $15.75 – $16.75/hr starting pay. $500 sign on bonus. High school diploma. Preferred qualification of 1 yr experience.
Maintenance Worker: Parker Property Management: Perform “make ready maintenance” of rental units. Paint, clean, maintenance, and yard work. $15-$20/hr.
Online Order filling and Delivery: Walmart: $16/hr
Retail Stocking Associate: Harbor Freight: 18 years old, $15/hr
Retail Stocking Supervisor: Harbor Freight: 18 years old, 1 year in retail: $18.20/hr
Production Associate: JVIS high school degree or equivalent, able to meet physical demands, frequent climbing, twisting/turning and lifting up to 50 pounds. $26/hr

Associates Degree Vs. Bachelors Degree:

This breakdown by age repeats itself for other community colleges as well. Taking the data from 30 schools, there are 2,011 students between the ages of 18-24 reporting income for 1 year after earning an Associates degree have a weighted average of $33,589 of earnings.

18-24: 2,011 (23%) Avg earnings: $33,589

25-34: 4,573 (54%) Avg earnings: $45,024

35-44: 1,299 (15%) Avg earnings:$54,641

45 to 54: 522 (6%) Avg earnings: $56,874

55-64: 122 (1%) Avg earnings: $55,275

for high school graduates for 1 year out, you don’t have sorting by age band because they are virtually all 17-19. Of course they are being significantly out earned by people substantially older than them. 76% of people who graduate with an associates degree are 25 or older, compared to 17-19 for the high school students. This also reflects in the Bachelor degree statistics. Most people who earn bachelors degrees do so directly after high school.

Reporting by age band for Bachelor degree earners 1 year out:

18-24: 5,869 (24%) Avg earnings: $43,401

25-34: 16,377 (68%) Avg earnings: $47,860

35-44: 1,184 (5%) Avg earnings: $62,317

45 to 54: 475 (2%) Avg earnings: $70,262

55-64: 127 (<1%) Avg earnings: $67,346

I would also argue that this statistic is skewed as well. The vast majority of people in the 25-35 age bracket earning 4 year degrees are much more likely to be on the lower end of that bracket in age. I would be willing to bet that greater than 75% of the 16,377 people in this age range are people who are 25 or 26. The Bachelor degree data is skewed downward by a higher representation of young people compared to the Associates degree data being skewed upward by a higher representation of older people. The people with bachelors degrees who are the same age as the people with Associates degrees AND over age 34, are out earning them by a much greater degree than the $3,500 shown in the initial data of this study.

Here is another learning from this breakdown: The average income for 18-24 year old’s with a Bachelor degree is only $43,401. This is presenting a very low income for entry level jobs for young graduates. Last week I wrote about how the average recent graduate in Michigan earns $50,000 a year, however that was not adjusted for age. Can you imagine comparing 2 friends who graduated high school at the same time, 1 went to work at Walmart for $34,000 a year with 2% yearly raises, while the other spends $125,000 and 4 years to earn $43,000 a year. The Walmart worker will be earning $36,800 at the end of 4 years, just $6,600 less than the college graduate. This difference barely covers the interest on the debt the college graduate will have racked up!

Is There Any Value To An Associates Degree?

I actually do believe that there is value to an associates degree. The first study showed that the median person with an associates degree working full time, earns $5,300 more than someone without. Adjusting for age, as 24-35 is a large range and older people naturally out earn younger people, it is likely the true value is somewhere around $2,000 to $3,000 a year in increased earnings. If the sticker cost is $8,400 for the associates degree at community college, AND the degree can be earned on nights and weekends, without reducing work hours while earning it, THEN an $8,400 investment returns $2,500 per year. That is a pretty good rate of return. It isn’t anywhere near the $23,000 our governor claims, but it is still a decent rate of return.

It also matters WHICH Associates degrees and Bachelors degrees are earned. A degree in Engineering will generally outperform a degree in Sociology. Mid Career earnings for STEM fields is $73,000 a year compared to Teaching at $46,000 a year.

Other Options Instead of An Associates Degree:

I would argue that the amount of time and money spent on an Associates degree could have a greater return if invested in specific career training. A great example is the truck driving school offered by Lake Michigan College. This is a 3 week program that costs $4,200 and has students who are earning $70,000+ upon graduation. It takes 3 weeks instead of 2 years, costs significantly less than an Associates degree, and earns almost twice as much.

Other options like coding boot camps or trade schools are likely to produce greater economic benefits. Union electrical apprentices can start at age 17 (with high school diploma) and earn $15.20/hr and increasing to $17.10 after 1000 hours. There are other raises through the 5 year program that guide income on a straight incline, and once completed they earn $39.50 an hour, plus benefits including employer paid healthcare and a significant pension plan.

I am a major proponent of getting into building trades. We have an aging workforce in the trades, and a major lack of workers who entered the trades between 1995 and 2020 when the college pipeline was at its peak and we as a nation told every child they must go to college to succeed in life. Add in that we have an aging population and an aging housing stock, and skilled building trades like plumbers, HVAC, and electricians will be making excellent wages and in high demand for the foreseeable future.

Conclusion:

We can’t allow our politicians to sell us a fake bill of goods. It is important to fact check these people and find the sources they are getting their data from. It is easy to make a sound bite with statistics. It is easy to mislead people with statements that are true but are misleading. If you graduate high school in Michigan you can earn $16 to $18 an hour right out of high school if working full time, which is the exact same income that 18-24 year old’s who graduate with an Associates degree earn on average. An Associates degree is not a magical ticket to a $23,000 raise. Unpacking the study they reference a Bachelor’s degree only earns a recent grad $43,400.