Paul Courtney was about mid-way through his senior year at Georgetown University in Washington when he decided to go to law school.
Seeing an opportunity to wait out a lackluster job-market rebound, he enrolled at the University of Pennsylvania Law School in Philadelphia in 2012. The 25-year-old already has a job waiting for him pending his graduation in May.
“It seemed like a very good way to ride it out while I was doing something I wanted to do anyway,” said Courtney, who grew up just outside Philadelphia and is the first in his family to go to college.
One unintended consequence of the most severe recession in the post-World War II era is that young adults have stayed in school to avoid facing unfriendly employment prospects. With research showing such investment pays off over time, the increases in educational attainment will probably promote gains in earnings, consumer spending and ultimately economic growth.
“Folks who are making good decisions about where to spend their money on college are getting a good deal,” said Beth Akers, a fellow at the Brookings Institution in Washington. “Investments in education lead to innovation, and innovation is what leads to economic growth across the nation.”
Some 34 percent of 25 to 29 year-olds held a bachelor’s degree, master’s degree, professional degree or doctoral degree last year, a higher share than in any year in data going back to 1968, according to Matthew Chingos, a senior fellow at Brookings. The share will probably increase as millennials, usually described as those born after 1980, mature.
After flattening in the early 2000s, adult educational attainment started rising after 2006 as the oldest millennials turned 25. The proportion with college degrees attained new highs in most subsequent years.
Higher education levels are usually associated with better labor-market prospects and earnings, data show.
The unemployment rate of college graduates ages 25 and older was 2.9 percent in September, compared with 5.3 percent for high school graduates and 8.4 percent for those with less than a high school diploma, according to Labor Department figures.
Meanwhile young adults with a bachelor’s degree earned a median $46,900 in 2012, compared with $30,000 for those with a high school diploma and $22,900 for adults without a high school credential, data from the National Center for Education Statistics show.
The earnings gap usually lasts over the course of a person’s life and can expand with more schooling, said Beth Ann Bovino, chief U.S. economist for Standard & Poor’s in New York.
“That’s a pretty significant college premium,” she said. “It’s a positive thing -- investing in yourself for the potential of more opportunities down the road.”
Those stronger income levels could also help power the economic expansion as “higher income growth virtually guarantees higher consumer spending growth,” William Emmons, a senior economic adviser at the Federal Reserve Bank of St. Louis, wrote in an e-mail.
Because consumer spending accounts for 70 percent of the economy, the higher earnings for many college graduates would help boost growth, Emmons said.
The value of a degree has come into question as tuition climbs and students take on loans to pay for college, only to be faced with a bleak job market upon graduation. The share of families headed by people younger than the age of 40 with school debt grew to almost 39 percent last year from about 22 percent in 2001, according to the Fed’s Survey of Consumer Finances.
The median amount of debt grew by 60 percent to $16,800 in the same time period, according to the Fed data.
For about one in four college graduates, the economic benefits of attending school hardly outweigh its costs, the Federal Reserve Bank of New York found in an analysis last month. The median annual wage for the bottom 25 percent of college graduates is little different than high school graduates’, economists Jaison Abel and Richard Deitz found.
The present value of a bachelor’s degree for the average graduate is still near a record of about $300,000, they found. Its worth “really has to be weighed against how well one would do in the labor market without a college degree,” Deitz said in an interview. “A college degree is, on average, still worth it. There’s quite a high payoff.”
The worst outcome occurs when students take on school loans and fail to graduate, said Ellen Zentner, a senior economist at Morgan Stanley in New York. That disproportionately happens to students from poorer households, exacerbating the income gap with those better off, she said.
Securing a degree is “key” to stamping out inequality, and the benefits go beyond the individual, Zentner said.
“The economic literature points to a better educated workforce being one with higher rates of productivity, higher rates of return and higher pay,” she said. “There are very sound arguments for a higher quality labor force.”
S&P’s Bovino estimates that if the American workforce gained another year of education, U.S. GDP would be $525 billion higher than otherwise in five years. Workers with college degrees could boost innovation, creating new firms, products and services and igniting a virtuous cycle for growth, she said.
The return to the workforce of more educated millennials as they graduate and the labor market firms may also temporarily underpin labor force participation, which has declined to the lowest level since 1978.
The participation rate for adults 20 to 24 years old suffered a precipitous decline starting after April 2009 and has been slow to recover. At 70.7 percent in September, it sits 1 percentage point shy of a four-decade low of 69.7 percent reached two years ago.
While seeking more education may be keeping people out of the workforce now, that may reverse later, “since participation rates are higher on average for more educated persons,” according to research by Fed economists published last month. The long-term trend for all groups will probably be weighed down by the retirement of aging baby boomers, they said.
For Courtney, the law student, getting a post-graduate degree was an easy choice, he said. And it seems to be paying off -- most of his classmates also have jobs lined up, he said.
“There had been forecasts that the job market would have rebounded by the time I finished law school,” he said. “Hiring seems to be in full force again.”
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