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The Economic impact of educational attainment

An “in-the-ballpark” estimate based on hypothetical situations and their potential effects on earnings and tax revenue for the State of Nebraska. Presented March 6, 2008. The Economic impact of educational attainment.

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The Economic impact of educational attainment

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  1. An “in-the-ballpark” estimate based on hypothetical situations and their potential effects on earnings and tax revenue for the State of Nebraska. Presented March 6, 2008 The Economic impact of educational attainment

  2. Hypothetical situations and their potential effects on earnings and income tax revenue for the State of Nebraska • Views educational attainment in terms of earnings and tax revenue gained or lost. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  3. Hypothetical situations and their potential effects on earnings and income tax revenue for the State of Nebraska • Views educational attainment in terms of earnings and tax revenue gained or lost. • This is not the only way to look at educational attainment, but it is a reasonable and logical way to look at it. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  4. Hypothetical situations and their potential effects on earnings and income tax revenue for the State of Nebraska • Views educational attainment in terms of earnings and tax revenue gained or lost. • This is not the only way to look at educational attainment, but it is a reasonable and logical way to look at it. • We must make some assumptions, which creates some limitations of the study. These are listed at the end of the presentation. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  5. Five Questions • Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • Question 2: What if our educational attainment levels were to rise to that of the best performing state? • Question 3: What if our educational attainment levels were to rise to that of the best performing country? • Question 4: What if our educational attainment levels were to rise to that of the best performing state or country? • Question 5: What if we raised the educational attainment of blacks and Hispanics to that of whites? Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  6. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • First we must adjust income differential figures for cost of living to make figures comparable across states. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  7. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • First we must adjust income differential figures for cost of living to make figures comparable across states. • Amounts indicate how much more money individuals would earn with a postsecondary degree compared to a high school diploma. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  8. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • First we must adjust income differential figures for cost of living to make figures comparable across states. • Amounts indicate how much more money individuals would earn with a postsecondary degree compared to a high school diploma. • Top charts adapted from “Higher Education and the Future of Nebraska” by Dennis Jones, President of the National Center Higher Education Management Systems. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  9. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • First we must adjust income differential figures for cost of living to make figures comparable across states. • Amounts indicate how much more money individuals would earn with a postsecondary degree compared to a high school diploma. • Top charts adapted from “Higher Education and the Future of Nebraska” by Dennis Jones, President of the National Center Higher Education Management Systems. • Bottom charts are the same figures adjusted for the cost of living. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  10. Difference in Median Income Associate Degree vs. High School Diploma Before cost of living adjustment Question 1: Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  11. Difference in Median Income Bachelor’s Degree vs. High School Diploma Before cost of living adjustment Question 1: After cost of living adjustment Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  12. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • Before the cost-of-living adjustment, Nebraska was ranked 48th in associate degree salary differentials, and 38th in bachelor’s degree salary differentials. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  13. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • Before the cost-of-living adjustment, Nebraska was ranked 48th in associate degree salary differentials, and 38th in bachelor’s degree salary differentials. • After adjusting for the cost of living, Nebraska moved to 45th in associate degree salary differentials, and 27th in bachelor’s degree salary differentials. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  14. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • In both cases, Nebraska still falls well short of the national average. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  15. Question 1: What if we moved Nebraska’s degree holders’ salary differentials to the national average? • In both cases, Nebraska still falls well short of the national average. • Even after adjusting for the cost of living, the salary differential is almost as much for an associate degree in Texas ($13,700) as a bachelor’s degree in Nebraska ($16,900). Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  16. Question 1:What if we moved Nebraska’s degree holders salary differentials to the national average? What would the annual increase in earnings be? What would the annual increase in state income tax revenue be? Answer:Total Annual Increase in Median Earnings: $927,300,000 Total Annual Increase in Tax Revenue: $42,657,000 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  17. Question 2: What if our educational attainment levels were to rise to that of the best-performing state? (Massachusetts)What would the annual increase in earnings be?What would the annual increase in state income tax revenue be?Answer:Total Annual Increase in Median Earnings: $474,800,000 Total Annual Increase in Tax Revenue: $21,842,000 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  18. Question 3:What if our educational attainment levels were to rise to that of the best-performing country?(Canada for associate and Norway for bachelor’s)What would the annual increase in earnings be?What would the annual increase in state income tax revenue be?Answer:Total Annual Increase in Median Earnings:$367,900,000 Total Annual Increase in Tax Revenue: $16,921,000 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  19. Question 4:What if our educational attainment levels were to rise to that of the best-performing state or country? (i.e. the “best case”)(Canada for associate and Massachusetts for bachelor’s)What would the annual increase in earnings be?What would the annual increase in state income tax revenue be?Answer:Total Annual Increase in Median Earnings: $502,850,000 Total Annual Increase in Tax Revenue: $23,131,000 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  20. Question 5:What if we raised the educational attainment of blacks and Hispanics to that of whites?How many more degree holders would there be?What would the annual increase in earnings be?What would the annual increase in state income tax revenue be? Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  21. Population age 25 to 64 by Race/Ethnicity and Educational Attainment Question 5: Before After Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  22. Question 5 Answer: 7,042 more associate degrees 22,879 more bachelor’s or higher 6,376 of which are graduate or first professional degrees Total Annual Increase in Median Earnings: $427,700,000 Total Annual Increase in Tax Revenue: $19,674,000 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  23. Summary of Additional Earnings • Only Change Earnings to National Average: $927,300,000 annually • Change Educational Attainment to Best State: $474,800,000 annually • Change Educational Attainment to Best Country: $367,900,000 annually • Change Educational Attainment to “best case”: $502,850,000 annually • Raise Minority Attainment to White levels: $427,700,000 annually Note: Totals should not be considered cumulative. Each total is the result of a separate scenario. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  24. Summary of Additional Tax Revenue • Only Change Earnings to National Average: $42,657,000 annually • Change Educational Attainment to Best State: $21,842,000 annually • Change Educational Attainment to Best Country: $16,921,000 annually • Change Educational Attainment to “Best Case”: $23,131,000 annually • Raise Minority Attainment to White levels: $19,674,000 annually Note: Totals should not be considered cumulative. Each total is the result of a separate scenario. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  25. Some Assumptions and Limitations Assumptions We will assume that… • The population age 25 to 64 with an Associate or Bachelor’s degree is employed in a position that requires a degree and is earning an appropriate salary. • All “additional” degree holders will remain employed within Nebraska, at jobs that utilize their degrees. • Educational attainment for 25 to 64 year olds is the same as 25 and over. • People age 25 to 64 make up 51% of each racial/ethnic group. • Postsecondary institutions are run as efficient businesses and therefore economies of scale apply to education costs. • Graduate and first professional degree holders earn the same salary as a bachelor’s degree. • No wage discrimination exists in Nebraska. • The mean annual income for all occupations in Nebraska (BLS), $34,300, is representative across the population. • 2006 Nebraska individual income tax rates apply. • Someone age 34 will work for at least 30 more years, without raises. • Nebraska individual income tax rates remain the same for the next 30 years. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  26. Some Assumptions and Limitations Limitations • Not a projection of where we could be if things changed now, but rather a hypothetical look at where we could be now if things had changed in the past. • Does not take into account a business owners’ perspective on raising wages. • Educational attainment based on a small sector of the population, resulting in a conservative estimate of earnings and tax revenues. • Increased education cost for “additional” degree holders not taken into account. Nebraska's Coordinating Commission for Postsecondary Education, March 2008

  27. For further information contact: Kermit Spade Data Analyst CCPE - Nebraska kermit.spade@ccpe.ne.gov www.ccpe.state.ne.us (402) 471-8276 Nebraska's Coordinating Commission for Postsecondary Education, March 2008

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