The February 2004 Growth & Justice Workforce First Report demonstrates the Economic Power of Education:

If you want to earn more, get more education. For individuals (on average, of course), the numbers are overwhelmingly clear.

Census data from 2000 for full-time workers (aged 21 through 64) in Minnesota show median incomes of $24,061 for high school dropouts, $29,666 for high school graduates, $32,440 for people with some college, $42,059 for people with bachelor's degrees, and $53,540 for people with advanced degrees.

And this truism has become even truer over time, as the economy has become more knowledge-based. The earnings premium in the U.S. for a college graduate over a high school graduate has grown from 50% in 1975 to 80% in 2000.12

In addition to higher incomes, college graduates have more employment stability. Nationwide, the unemployment rates in December 2003 were 5.5% for high school graduates with no postsecondary training, and 3.0% for people with college degrees and higher.13 College graduates are much more likely to work full time. Nationally, 9.8% of working adults with bachelor's degrees work part time, compared to 20% for all workers.14

If this works for the individual, does it also work for an overall economy? Does a better educated population equate to a stronger economy? The answer is yes.

Per capita income is considered one of the best measures of an overall economy. It's not surprising that there is a strong link between educational attainment and per capita income. In 1960, Minnesota ranked 19th among the states in percentage of high school graduates among the over-25 population, 24th in percentage of college grads, and 24th in per capita income. Forty-two years later, our high school ranking had risen to 3rd, our college ranking to 8th, and our per capita income to 7th. Similar linkages can be found in other states.

The connection also applies if we measure economic output instead of per capita income. Minnesota now ranks 8th in the nation in the share of the population with a college degree, at 30.5%; it is 12th in economic output per person. Of the top 15 states for college degrees, 13 are above the national average in economic output per person.

But does the education level of a population predict or explain future economic growth? In other words, does education translate not only into better incomes but also better future prospects for the whole community?

A recent analysis of the economy of America's 250 largest cities concludes that it does. The strongest predictor by far of a city's economic growth from 1990 to 2000 was its proportion of college graduates at the beginning of the decade.15

This makes sense intuitively. A more educated workforce should be more productive, and one study estimates that in recent decades, increases in educational attainment of the U.S. workforce contributed an average of 0.3% to overall economic growth per year.16 This does not include the effect of educational attainment in making capital more productive.17 In other words, as workforces become more educated, they are more apt to attract and develop highly technical, emerging industries, thereby benefiting the state in the form of increased economic growth.

The benefits to society of a more educated population are not limited to just higher incomes.

For example, studies have demonstrated that welleducated people are less likely to commit crimes, less likely to experience frequent job turnover, and less likely to need public cash assistance - even after controlling for income. Studies showing only the market benefits of education estimate between 7% and 9% returns to investment on education. Studies that take market and non-market benefits into account estimate returns on investment in education as high as 14% to 18%.18 In addition, the potential return on investment for education increases over time and through generations.

Some critics have argued that the power of education to raise wages in the future is limited by the large number of jobs being created that require no more than a high school education and pay low wages. Locally, they cite the Minnesota Department of Employment and Economic Development's quarterly report on job vacancies, which found that 42% of vacancies require no education beyond high school and the median wage for all vacancies is only $10.28 in the 4th quarter of 2003. However, the vacancy report overweights lower-quality jobs in two ways:

• It includes many part-time jobs, which keep showing up as vacancies because of high turnover. Nearly two fifths of the vacancies are part-time, and these have a median wage of $8.50 while the median full-time vacancy pays $12.00.
  
  
• It does not capture many higher-quality jobs that are filled by internal promotion. A study by the state a few years ago revealed that the median wage for Minnesotans who had been with the same company for more than one year was $16.31, compared with $8.56 for Minnesotans who had worked for the same company for less than half a year in 2000.19

The picture is clear. Minnesota has outperformed the nation over the past 40 years, on both economic and social measures because of its superior educational attainment. We need to remain superior in this category if we want to continue to outperform.

Can we be confident that we will remain a leader in educational attainment? There are some positive signs. Our rank on all educational attainment levels rose from 1990 to 2000. In addition, Minnesota ranks first in the nation on 4th and 8th grade National Assessment of Educational Progress (NAEP) math scores, and in the top 10 for NAEP reading scores for 4th and 8th grade. The National Education Association reports that Minnesota ranks 2nd in ACT scores among states where ACT tests are commonly taken. Both the National Commission on Teaching and America's Future and the National Education Association rank Minnesota 1st in the nation in teacher quality.

February 2004 - Workforce First: The Economic Power of Education, Growth & Justice.