We are continually confronted by the myth that there are lots of good-paying jobs that don’t require higher education. “Not everyone should go to college,” people claim. While that’s true on a personal level–not every person will benefit from college, and people find fulfillment on the job in a myriad of ways–on a community level, it’s a dangerous message. The economic data we update year-to-year show that, more and more, jobs that pay well require post-secondary education. And the best way to ensure a good-paying job is to earn a B.A. or higher.

Today we’re sharing an update to an analysis we ran in 2019, which looks at the jobs in Michigan, what those occupations pay, and what education they require. (The previous analysis used 2017 data; today’s analysis uses 2019 data).

For this analysis, we define lower-, middle-, and higher-paying jobs in relationship to the national median (half of American workers earn less, and half more) and the national 75th percentile. So, here are the headlines.

The majority of jobs in Michigan are in occupations that are lower-wage.

First, we start by looking at the 4.3 million total jobs in Michigan, and how many fall into which category. More than half–56 percent–of Michigan jobs are in lower-wage occupations. The percentages here haven’t changed much since our last analysis. If we were performing level with the national median, another 258,000 Michiganders would be in jobs in occupations that pay above the median.

This figure often surprises people. When we ask why 43 percent of Michigan households can’t afford basic necessities, this is a big part of the answer. Structurally, there are simply too many jobs that are in lower-wage occupations.

The remaining Michigan jobs are split evenly into middle-wage (between the national 50th and 75th percentiles) and high-wage occupations (top 25 percent, nationally).

Next, we look at those segments and the education levels required.

A preponderance of jobs in the higher-wage occupations require a Bachelor’s degree–or more.

Now we turn to looking at higher-wage jobs. The vast majority of these jobs are in occupations that require a four-year college degree: almost 80 percent. This is up from 77 percent when we ran this analysis on 2017 data. Even apprenticeships and associate degrees don’t land many people in the this higher-paid category (three percent of these jobs are in occupations that require apprenticeships; two percent require associate degrees).

The largest category of higher-paying occupations that don’t require a B.A. are jobs that one is promoted into–they aren’t the result of a particular educational achievement.

This one takes a bit of explaining. The category of “no B.A., promoted to occupation” that you see in the chart above (of higher-paying occupations) includes managerial roles that don’t require specific educational backgrounds. We know from other research that these jobs are not necessarily easy to come by. They tend to require job experience and really strong interpersonal skills such as collaboration and communication–the skills that make good managers.

One implication of this category’s prominence here is that it is difficult to build a strategy around, except to know that in all educational efforts, from K-12 to various post-secondary, the development of these interpersonal skills should be a goal.

The number of jobs that both pay well and require less than a B.A. is smaller than you think.

So if most of the jobs that pay higher wages require either a B.A. or are in managerial roles, what opportunities exist for those who have earned a post-secondary credential that isn’t a B.A.? As noted above, the number of jobs in middle-wage occupations is simply smaller than you might expect (especially if you still think of Michigan as a place with a broad middle class). Only 22 percent of total jobs, or around 946,000 jobs in the entire state, are in the middle-pay occupations. Within that segment, we see a wide range of educational requirements. Yet still 24 percent of those jobs require a B.A. Which means the number of jobs in middle-pay occupations that require an associate degree is 161,000. The number that require an apprenticeship or some college is around 218,000. This is not the foundation of a large, prosperous middle class that we might wish it was.

The idea that Michigan has a bunch of good-paying jobs that don’t require at least a Bachelor’s degree is a fallacy. This data are consistent with the data that show significantly higher lifetime earnings with greater education, and emerging data that people with higher education levels are weathering this pandemic more successfully (at least, by their wallets).

Data analysis by Don Grimes, University of Michigan, for Michigan Future Inc. Charts by Michigan Future. You are welcome to download and use these infographics in your own work, with proper credit.

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(1) Stay away from for-profit colleges. The number of students who take out loans at these institutions and eventually default is incredibly high, even if they earn a degree.

(2) And second, loan default rates are incredibly low for students who never attended a for-profit college, and earn a bachelor’s degree.

There is a lot of other data in the post, but those are the major lessons. Today, I want to present two graphs to illustrate these major findings.

The first graph shows the overall default rates (students who, at any point, defaulted on a loan they took out to pay for school) for three different groups of students: (1) those who started at a four-year college in 2004 and never attended a for-profit college; (2) students who started at a two-year college in 2004 and never attended a for-profit; and (3) all students that started college in 2004 but at some point attended a for-profit college.

As you can see, default rates for students starting at both four- and two-year colleges are around 12 percent. For students who ever attended a for-profit? 45 percent. Nearly half of all students who walk through the doors of a for-profit college will default on their loans.

Lesson one: stay away from for-profit colleges.

The second graph breaks down the outcomes for all students who started at a four-year college in 2004 and never attended a for-profit, based on degree-attainment. We dove into this population because the public narrative makes it seem like attending a four-year college leads to crippling debt. But the narrative doesn’t stand up to the data.

Less than 5 percent of students who started at a four-year college, never attended a for-profit, and earned a bachelor’s degree ever defaulted on their loans. And this represents the majority of students who started at a four-year college in 2004 and never attended a for-profit: 62 percent of these students earned a bachelor’s degree in six years.

Lesson number two: complete a bachelor’s degree.

Yes, a quarter of students who failed to complete their degree did at some point default on their loans, and that’s not good. Ideally going to college would carry no risk at all. However, under current conditions, in which a bachelor’s degree is all but required to obtain high-paying work, but college costs are still historically high, the solution isn’t to tell all non-affluent kids to avoid college. Instead, it’s to make sure they complete college.

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Think about the work world as a practical matter: The only time you really care about someone’s degree is if someone’s talking about who’s playing football or basketball. Nobody cares once you’re on the job six months or a couple years. It’s not relevant.

The labor market, however, begs to differ.

The presentation that accompanied the rollout listed high-demand occupations, along with the total number of available jobs projected through 2024 in each occupation, and the average salary in that occupation. The Marshall Plan calculates the average salary for all these occupations as just over $60,000. However, that average hides the fact that nearly all of the occupations that pay $60,000 or more require a bachelor’s degree or higher.

Below are three charts, showing the target occupations listed in the governor’s plan, split by the education typically required for entry to the occupation, defined by the Bureau of Labor Statistics. The charts show the number of job openings projected through 2024 using the figures in the Marshall Plan materials (though we have some questions on the validity of these figures, as they’re far different from the official projections released by the state’s Department of Technology, Management, and Budget); the median income of that occupation; and the percentage of workers in that occupation with a bachelor’s degree or higher.

As you can see, of the 38 occupations listed (the Marshall Plan materials list 37 occupations, as the two sales representatives occupations are collapsed to a single category), 15 have a median income of over $60,000. 14 of those 15 jobs require a four-year degree. For every target occupation in the Marshall Plan for Talent that requires a bachelor’s degree, the median income is $60,000 or more. For all the rest of the occupations, only one – plumber – clears the $60,000 threshold.

And using the Marshall Plan projections, these high-education, high-paying occupations represent over 50 percent of the 811,000 openings in these target occupations through 2024.

We included the third column, which shows the percentage of workers in each occupation with a bachelor’s degree or higher, because people often question whether a bachelor’s degree is truly necessary in some of these high-paying jobs. The fact that the vast majority of the high-paying occupations have a high proportion of workers with a bachelor’s degree or more shows that employers are paying a premium for that degree, and that those with less than a bachelor’s degree would indeed struggle to get a job – and a higher paying job, in particular – in that field.

The Marshall Plan messaging seems to be that there are a bunch of $60,000 jobs out there that we can fill through competency-based certificates and stackable credentials. A look at the data, however, tells a completely different story. Employers continue to reward four-year degree holders, and not because a four-year degree represents some competency in a discrete set of skills. They reward four-year degree holders because a four-year degree represents deep and broad knowledge in a particular discipline, as well as a whole set of communication, learning, and thinking skills that will enable workers to adapt to an ever-changing economy.

In other words, if you want a high-paying job, the surest route is a four-year degree. End of story.

In the rollout of the plan, Governor Snyder, talking about all the jobs that need to be filled in the coming years, said “It’s a disservice if we don’t do something to solve this problem – to our citizens and ourselves.” We agree that there’s a problem, but as the data clearly shows, the solution is that we need far more Michiganders attaining bachelor’s degrees to fill these high-paying jobs, and attract even more high-paying jobs in years to come.

Yes we need more funding to help Michiganders earn occupational certificates and Associate’s Degrees for those of us who choose to pursue that path. But we also need to  invest more in our public universities. Since 2001, the state has cut appropriations to our public universities by over $1 billion in real terms. This both blocks access to non-affluent students by increasing tuition, and prevents universities from putting in place the necessary programs to increase degree completions. Investing in our four-year universities, and in the students who seek to attend them, would surely have the potential to be revolutionary for thousands of Michigan students.

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So prevalent is this narrative, it all but demands a bit of fact checking. So I looked at the numbers.

Young people always struggle in the labor market. Young college graduates struggle less

The first thing to know is that freshly minted college graduates always do worse than their more experienced peers. Employers, all else equal, would prefer to hire workers with experience. In the spring of 2016, the Economic Policy Institute looked at the unemployment rate for young college graduates, aged 21 to 24 – a fairly small group, as many college graduates don’t finish their degree until after age 24.

Despite that, the unemployment rate for this young but educated cohort was just 5.6 percent, roughly where it’s been for the past 25 years, outside of economic booms and busts.

But if this is slightly elevated, it doesn’t take long for young college grads to find their footing. The current unemployment rate for 25- to 34-year-olds with a BA is just 2.5 percent. If you’re surprised, you’re not the only one. Respondents to a New York Times survey in the spring of 2016 put the unemployment rate for 25- to 34-year-olds with a BA between 6.5 and 9 percent – despite being told that the unemployment rate for high school graduates with no further education was 7 percent. The myth of the college educated basement dweller is powerful indeed, but, as the data shows, it’s nothing more than a myth.

And while the unemployment rate for young college graduates is higher than for their somewhat older peers, the unemployment rate for young high school graduates that do not go on to college is incredibly high, up at 18% in the spring of 2016.

This rate also drops as these individuals enter the 25- to 34-year-old age bracket, but remains nearly two and a half times the unemployment rate for BAs.

Here are the numbers today for the 25- to 34-year-old age bracket: the unemployment rate for those with no education beyond high school is 6.7 percent; for those with some college (including an associate’s degree) it is 5 percent; and for those with a bachelor’s degree is 2.5 percent.

What about earnings?

Many of the anecdotes about the plight of college graduates have to do not with unemployed college grads but underemployed college grads – the graduate from a fancy college now working as a barista or in retail. Sure, these college grads may be employed, one might say, but they’re employed in low-level jobs that don’t require a college education.

Again, the data doesn’t support the anecdote. Or if it does, the coffee shops are paying pretty well.

A couple weeks ago, Lou wrote about how the wage premium associated with earning a bachelor’s degree continues to grow, contrary to the popular narrative. It turns out that this wage premium holds if we just look at the younger cohort as well. Based on 2015 data from the Current Population Survey, those in the 25 to 34 age bracket with a bachelor’s degree were earning a median of $50,000, far higher than those with an associate’s degree or some college ($34,600 to $37,000) and those with just a high school diploma ($30,550).

While there is some evidence that young college graduates today have slightly higher underemployment rates than young college graduates in the early 2000s (in this case, underemployment means working in a job that doesn’t require a bachelor’s degree), this is probably to be expected for graduates entering the economy after the Great Recession. But even in this case, underemployment doesn’t last long, with projected rates of underemployment dropping to historical norms by the time young college graduates reach their early 30s.

Looking at the whole picture

The overall point is this: attaining a bachelor’s degree is not an absolute guarantee of financial success – but it offers the best chance of success for young people entering a rapidly changing economy. It’s worth noting that this has not always been the case. In the mid-1970s, the bachelor’s degree wage premium narrowed considerably, as college graduates flooded the market and good-paying work could still be found with a high school diploma.

But in recent years, despite the fact that we have more college graduates in the labor market than ever before, the college wage premium has continued to increase, and these grads continue to be employed at far higher rates than their less educated peers.

All that to say, if you’re worried about that college graduate in your basement, rest easy – they should be out of the house soon enough.

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In October of last year, the federal government released new data on student debt and repayment that offered the most comprehensive picture yet of exactly who is having trouble paying back their student loans, and at which type of institutions, allowing us to take a more nuanced look at the student loan landscape. The picture is both better and worse than most people think.

The for-profit sector is responsible for much of the damage

What primarily jumps out from this new set of data is the outsized role the for-profit sector plays in the student loan “crisis.” While 17 percent of all students that began college in 2004 had defaulted on their loans within 12 years of college entry, a full 47% of students that started at for-profit colleges had defaulted within that same time span. Based on existing default rates and patterns from past cohorts, Judith Scott-Clayton of the Brookings Institution projects that 70% of the 2004 for-profit cohort will default by 2024.

In other words, if we do have a student loan crisis on our hands, it’s for-profit colleges that are driving it.

Graduation and four-year degrees really matter

Susan Dynarski, an economics professor at U of M, has written for years that what we see as a student debt crisis is actually more of a college completion crisis. It turns out that those that get into trouble paying back student loans generally don’t have a lot of debt – because they didn’t spend enough time in college to complete their degrees. So they leave college with a relatively small amount of debt, but with no credential to help them earn a wage premium in the labor market. College graduates tend to carry more debt, but are earning enough that they have little trouble paying it off.

This new data again emphasizes the importance of graduation, and the importance of earning a valuable credential. Of the 2004 cohort, just 5.6 percent of students who attained a bachelor’s degree defaulted on their loans within 12 years. This is three times lower than the rate for all students, and reflects the fact that the bachelor’s degree wage premium continues to rise, enabling BA holders to easily pay back their loans.

These same positive outcomes do not hold for those that earn an associate’s degree or occupational certificate. 14 percent of the 2004 cohort that earned an associate’s degree defaulted within 12 years, and 28 percent of those that attained a certificate defaulted, despite average loan burdens far lower than for those who earned a bachelor’s degree. This is driven both by greater participation by for-profit institutions in the sub-baccalaureate space and uneven returns for sub-baccalaureate credentials.

Regardless, the higher rates of default among sub-baccalaureate completers is an important finding. The risk of student loan defaults is often cited as a reason students should avoid attending a more expensive four-year institution, and opt instead for cheaper two-year schools. This data suggests that passing on a four-year school may in fact be the far riskier option.

Black BA holders

The most disappointing finding from the data was that the low default rates for those that earn a BA do not hold for black students. While just 4 percent of white BA holders defaulted within 12 years, 21 percent of black BA holders did, an unacceptably high number.

What’s driving the high number of defaults? Evidence suggests that black recent-graduates face discrimination in the labor market, with an unemployment rate double that of white recent-graduates. Black students are also more likely to attend lower-selectivity colleges, whose alumni experience lower earnings and higher default rates.

But a major factor also appears to be patterns in graduate school borrowing among black college graduates. Perhaps because of relatively poor labor-market outcomes, black college graduates are now more likely than white college graduates to attend graduate school, a relatively recent phenomenon. But the increase in graduate school attendance among black college graduates has been almost entirely driven by attendance at for-profit graduate schools, with almost 30 percent of all black graduate school students attending a for-profit institution.

As is the pattern in the rest of the for-profit sector, these students borrow significant sums to attend these institutions, yet see little return on their investment in the labor market.

Counseling, counseling, counseling, and counseling

The reason I keep putting scare quotes around the word “crisis” in this post is because taking out student loans shouldn’t be all that scary. Yes, college needs to be far cheaper, and we need to commit dramatically more public funds to make it cheaper. But under our current system, in which a a four-year college is really expensive, yet offers the best pathway to good-paying work, loans are a necessary tool to give all students access to higher education. And scaring students away from taking on debt makes it less likely that they’ll attend college, less likely that they’ll persist, and less likely that they’ll graduate. This is a problem because even if a bachelor’s degree doesn’t guarantee economic success, it certainly offers a far better chance of being employed in a good-paying job than other potential paths.

What’s needed instead is more and better counseling at all stages of the college process. This means counseling high school students into colleges with high graduation rates and good financial aid; counseling students to take on appropriate levels of federal student loans; counseling students to persist through to graduation; and then counseling them to enroll in income-based repayment systems to prevent loan defaults.

The right kind of loans, for the right kind of education, can be the best investment of a student’s life. It’s our job to make sure that it is.

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There’s a been a lot of talk in Michigan about the shortage of Michiganders prepared for skilled trade jobs. The rationale is that there are well-paying jobs to be had that require some education beyond high school, but short of a bachelor’s degree. Some also claim the need for skilled trade workers will only widen in the coming years, as baby boomer electricians, carpenters, and welders retire, with too few skilled young folks to fill their spots.

This narrative isn’t altogether wrong. There are indeed thousands of jobs in Michigan that require some training beyond high school short of a bachelor’s degree, many of which offer a decent salary.

The question, however, is why we’re placing so much emphasis on these mid-skill jobs when all evidence suggests that we’re still under-producing bachelor’s degrees – by a long shot.

One reason the narrative persists that we’re overproducing four-year degrees and under-producing in the skilled trades is plentiful anecdotes. There’s all these baristas running around with bachelor’s degrees, meanwhile I can’t find a good carpenter! Or something along those lines.

But when you look at the data, a completely different story emerges.

Economic theory would predict that if we were oversupplying the economy with four-year degrees, the income gap between four-year degree holders and everyone else would diminish. This hasn’t happened. Based on data from the American Community Survey analyzed by Brookings, those with a bachelor’s degree (and not an advanced degree) earned almost $51,000 in 2015, versus $29,000 for high school grads and $34,000 for “middle-skill” jobs. This is a reflection both of higher wages paid to college grads, and more work available to them (the unemployment rate for four-year college grads is just 2.4%, though the American public believe it’s much higher). And the BA wage premium has only increased in recent years, despite the fact that the more and more BA’s are flooding the market.

Indeed, the data on new jobs created since the recession, from the Georgetown Center for Education and the Workforce, should leave us pushing four-year degrees like crazy. Since the start of the recession, 8.4 million jobs have been added to the economy for those with a BA, versus a net-gain of 1.3 million mid-skill jobs (1.7 million lost during the recession, followed by 3 million gained), and a loss of 5.5 million for those with a high school degree or below. Jobs requiring a BA were both recession-proof, and have been by far the dominant type of jobs generated since the recession.

And not only did the vast majority of new jobs go to BA holders, but all the good paying jobs did as well. Of the 2.9 million jobs added to the economy between 2010 and 2014 with salaries of over $53,000, 2.8 million went to those with a BA or higher.

Just what were all these well-paying, bachelor’s-requiring jobs? The majority are classified in the general category of “managerial and professional office jobs,” which include various types of “managers” and “analysts.” These jobs that have been gaining ground require good research and communication skills, collaboration, self-direction, and the ability to deal with ambiguity. In other words, the skills you learn in a liberal, four-year postsecondary education.

Armed with this data, the emphasis on middle-skill jobs is curious. The signs that these jobs are in-demand – more jobs added to the economy and rising wages for these occupations – haven’t emerged. If anything, some of the core occupations that would absorb skilled trade jobs, like production and construction, saw the biggest losses during the recession, and the jobs have not come back (see p. 20 of the report for the breakdown by occupation group).

Meanwhile, jobs requiring a BA still see a significant wage premium, and new “knowledge” jobs continue to be created.

This faulty narrative matters because by and large it’s the non-affluent targeted for these middle-skill jobs, because a four-year degree “isn’t for everyone.” And while a four-year college may not be for everyone, policymakers shouldn’t be the ones deciding that for students – because they actually have no idea who college is “for.” Recent studies have found that low-income students with low test scores who went to a four-year school versus observationally equivalent peers with similar scores who didn’t were far more likely to have earned a degree (both four-year and two-year), and were earning more by their late 20s.

These were kids who “weren’t college material,” yet gave it a shot. Some thrived. Some tacked back and earned a two-year degree. On the whole they were better off.

The point is that while there are certainly a lot of good, middle-skill jobs out there, there’s no reason we should be selling these jobs over those requiring more education – particularly when all evidence points us the other way.

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