Where college degrees pay off more
It’s well known that financial benefits to a college degree differ for different college majors. And N.C. State University economist Mike Walden says that a recent study by the Federal Reserve Bank shows that the cash value of that degree varies by where the graduate chooses to live.
“We all know that going to college does pay off. In fact, the average college graduate earns about $2 for every $1 that a high school graduate earns. But that payoff does appear to vary by where you live.
“For example, a recent study found that college graduates in Texas — particularly in Houston and Dallas — earn much more than high school graduates. They earn about 90 percent more. In comparison college graduates in cities like Chicago and Seattle earn only about 50 percent more than high school grads.
“So the big question is why? And we might think that there are several factors at work. One might be the availability of college jobs. Another might be the attractiveness of the city. That is to say, cities that have more amenities — cities in which people want to live. The businesses there don’t have to pay the college graduates as much because they actually want to live in the city. So they are giving up some of that earning power in order to be around nice things.
“And if you think about just the examples I gave — Chicago and Seattle, which have low college premiums versus Houston and Dallas — I think a lot of college graduates especially might find Seattle and Chicago more exciting cities. They are older cities with a lot of history. They have a varied climate versus Houston and Dallas.
“This issue is certainly is not settled, but the message here to a college graduate: It does depend where you live in terms of what kind of premium you will get for your college education.”Category: Economic Perspective