Higher Education May be Costly But It Gives a Big Financial Return
IT pays to stay in school.
Indeed, a new study finds each year of additional education increases the wages of an individual by 16 percent, nearly double previous estimates. On average a college graduate makes about 64 percent more than a high-school graduate.
To reach that conclusion, Princeton University economists Orley Ashenfelter and Alan Krueger interviewed participants in the 16th Annual Twins Day Festival in Twinsburg, Ohio, in August 1991. Their purpose in surveying twins was to ensure that the correlation between schooling and wage rates is not due to a correlation between schooling and a person's ability or other characteristics. Since monozygotic (from the same egg) twins are genetically identical and likely to have the same family backgrounds, suc h twins are seen as more likely to have similar intelligence and other abilities.
In effect, the study confirms Census Bureau data showing that those with college educations enjoyed a sharp rise in their incomes in the 1980s, while those with high-school or less saw a decline. Those numbers, however, say nothing about whether this income difference was affected by ability levels.
The Ohio festival, the largest gathering of twins in the world, attracted 3,000 sets of twins, triplets, and quadruplets. Mr. Ashenfelter and Mr. Krueger interviewed more than 495 separate individuals over the age of 18 during the festival's three days.
Parents of identical twins often do not know quite how to treat their matching offspring, Ashenfelter says. That is reflected in such first names for twins as: Marie Antoinette and Mark Anthony, Ron and Don, Ned and Fred, Chester and Lester.
In a National Bureau of Economic Research paper, the economists write: "Much of the purpose of a twins festival is to celebrate the similarity of the twins who are present. The participants therefore tend to dress alike and to celebrate their similarity. As a result we suspect the twins in our sample may bear stronger similarities than would be the case in a random sample of twins."
They were looking especially for identical twins with a difference in the number of years of schooling between them.
When estimating the economic return to education, they did not use the questionnaire data from fraternal, or dizygotic, twins resulting from the fertilization of separate eggs. Such siblings are genetically similar only as are brothers and sisters. The data collected shows that the wage rates and education levels of identical twins are more highly correlated than for fraternal twins.
One problem for those considering investing large sums in a college education is that there is no guarantee of a 64 percent return in post-graduation wages, Ashenfelter notes. The survey looked at averages, and within those averages, some individuals got a poor return on their investment in education.