New Census Bureau study reveals the importance of education in maximizing lifetime earnings.
The importance of education in creating wealth is a factor second only to hard work, according to wealth level studies conducted by Millionaire Corner. But it is the wealthiest households that put the highest premium on their schooling. Ninety percent of Ultra High Net Worth households with a net worth between $5 million and $24.9 million attribute their wealth in part to their education compared to 75 percent of those with a net worth between $100,000 and $1 million.
If the wealthiest households seem to appreciate the importance of education more highly, it may be because of the effect of education levels on learning. According to a new U.S. Census Bureau study, education levels had more impact on earnings over a 40-year span in the workforce than any other demographic factor, such as gender or race. A worker with a professional degree, for example, is expected to earn more than a worker with an eighth grade education or lower.
The study, which is comprised of data for the period 2006 to 2008, confirms that higher levels of education “is a well established path to better jobs and better earnings.” The education level has risen in America over the past seven decades. In the 1940 Census, 24.5 percent of people aged 25 and over had at least a high school diploma. In 2008, this increased to 85 percent, while nearly 28 percent had a bachelor’s degree or higher and 10.2 percent of people 25 and over had advanced degrees.
The higher the level of education achieved, the better the access to more specialized jobs that are associated with higher earnings. “Degrees in many occupations are treated as job training that may be required for a position or earn the employee more pay within that position,” the study stated.
The importance of education cannot be overstated, even when weighed against factors such as race, gender, citizenship, English-speaking, and geographic location. Each does influence work-life earnings. For example, those who spoke a language at home other than English saw a decrease in annual earnings, and even those who speak English “very well” saw a decrease of nearly $1,000 in annual earnings compared with English-only speakers.
But education had a more profound impact. The estimated impact on annual earnings between a professional degree and an eighth grade education was about $72,000 a year, roughly five times the impact of gender, which was $13,000.
Overall, the study found, white males had higher earnings than any other group at every education level, with the exception of those with a master's degree, which was topped by Asian males. There was no significant difference in earnings between Asian males and white males who had a professional degree.
The economic challenges women face in the workplace were borne out by this study, which found that women in the most economically advantaged race groups usually earn less than men in the most disadvantaged race groups. For example, a white female with master's degree is expected to earn $2.4 million over a 40-year work-life versus. A Hispanic male with a master’s degree is expected to earn $2.8 million.