Education’s Role in Earnings, Employment, and Economic Mobility

By Yesenia Ayala

Recently, the Federal Reserve Bank of New York released a report that explored the ways in which school type, selectivity, and major affect employment and earnings post-college both at six and at ten years after enrollment for fall freshman entry cohorts from 1997 to 2007.

Among the findings:

• For four-year institutions, findings demonstrate that college type and selectivity does make a difference in the labor market for medium term earnings (six years after enrollment).
  • Those enrolled in selective colleges earned on average 11% more than similar students who attended non-selective institutions.
  • Students who attended for-profit colleges earned on average 17% less than those who attended private not-for-profit four-year institutions.
• College major also played a role in medium term earnings. Students who earned a STEM major or a business major earned 10% more on average than those majoring in Arts and Humanities.
• For long-term earnings (ten years after enrollment), the data showed that college-type effects become more pronounced, while major choice effects remained similar to medium-term earning effects.
  • Students who enrolled in selective colleges on average earned 20% more than students who attended non-selective colleges.
  • Students who attended for-profit colleges earned on average 18% less than those enrolled in private, not-for-profit four-year institutions.
• The report also considered the impact that college-type had on economic mobility- which they defined as how earnings compared between the top and bottom income terciles.
  • For-profit college attendance widened the income disparities between the top and bottom income terciles, increasing the earnings gap by 117% compared to private, not-for-profit colleges.
  • Four-year public colleges lessened the income disparities between the top and bottom income terciles, decreasing the earnings gap by 25% compared to private, not-for-profit colleges.
  • Selective colleges lessened the income disparities between the top and bottom income terciles, decreasing the earnings gap by 43% compared to non-selective institutions.