What Do State-Level College and Labor Market Data Teach Us About Higher Education Policy?

Attaining some kind of college degree is the surest way to improve one’s earnings in the United States. But many college students don’t attain any credential, and many—especially in our community colleges—earn credentials with little labor market value.

Take Florida, for example. Analyzing administrative data on the state’s high school and college students linked to earnings records there, my colleagues and I have found the following:

• Only about 30 percent of those attending community college finish their associate’s (AA) degrees, with much lower rates among black males (15 percent) or low-income males (19) than others.
• Among high achievers in high school (those who scored in the top quartile on the state exam), 46 percent of those who enroll in community college earn an AA degree; 66 percent of four-year college enrollees earn a bachelor’s (BA) degree.
• Among low achievers in high school (those who scored in the bottom quartile of Florida students on the state exam), 32 percent earn vocational certificates but just 15 percent earn AA degrees.
• In the labor market, young workers with certificates, AA, or BA degrees earn 31, 34, and 61 percent more than high school graduates, respectively. But AA degrees outside of technical fields have fairly little market value, especially those in the humanities (such as General Studies or Liberal Studies). Yet, nearly half of all AA degree recipients are humanities majors.

These data have some strong policy implications. For starters, too many students enroll in AA programs when better alternatives may be available to them. For instance, many high achievers would have better outcomes if they directly attended four-year rather than two-year colleges since completion rates and subsequent earnings are both substantially higher for those at the four-year schools. Indeed, many community college students initially intend to transfer to a four-year program, but a large fraction don’t transfer or complete a BA degree.

Overly high attendance rates at community colleges are part of a larger problem. High achievers from low-income or minority families are particularly likely to be “under-matched”—they could get into better colleges than they end up attending. This problem is reflected in how many enroll in AA vs. BA programs and in under-enrollment at the “flagship” universities among those qualified to attend (and get financial aid). Most such students have very little knowledge of the postsecondary world so attend the only college they know about—the one nearest to their homes or high schools. Alternatively, perhaps the greater affordability of community colleges and the convenience of being nearby are the draws.

At the same time, many lower achievers have higher success rates in certificate than AA programs at community colleges. Since certificates can be achieved more quickly and offer better labor market rewards than average AA degrees do, encouraging low-achieving students to consider the certificates more seriously makes sense.

Poor performance and lack of completion in community colleges partly reflect the weak academic preparation of many students in their K-12 years. Nearly 60 percent of AA degree students nationwide enter “developmental” (remedial) classes because their basic skills are too weak for them to pass an algebra class or a community college entrance exam. And most never emerge to take AA classes for credit. At least some of these students might be better off in certificate programs, or getting labor market skills through apprenticeships or high-quality career and technical education, in high school and beyond, since these programs have strong track records for improving students’ later earnings.

But, among those equipped to handle AA coursework, why don’t more pick programs with stronger returns—say, health care, information technology, or security? Such issues were beyond the scope of our initial study, but we can speculate about the answers to these questions. Perhaps students don’t like the fields or don’t have enough math or science background to complete the programs. For instance, a student who wants to become a health technician—perhaps a phlebotomist or X-ray technician—must typically pass an anatomy class first.

Two additional problems might also limit enrollment in technical fields of study. One is too little career counseling and guidance at community colleges to help students choose fields with available jobs and strong earnings. Second is too little teaching capacity there in these fields. My conversations with community college administrators in recent years convince me that both these limitations are real.

Our community colleges have too many students and too few resources to invest in serious counseling, whether academic or career-oriented, and the costs of equipment and teachers for these classes are too high. In fact, most teachers in the high-demand technical fields must be hired from the outside as adjuncts since the regular community college faculty often lack the appropriate skills. The adjuncts are expensive in some more technical fields, and it is hard to scale up programs that rely on them. And, since state subsidies for higher education are based on student “seat time,” and not on whether students complete their studies or earn more afterwards, many college administrators believe it is too expensive to offer more of these classes.

The bottom line?

• First, offer students a wider range of high-quality pathways into the labor market besides just AA or BA programs by expanding effective career and technical education and apprenticeships.
• Second, give students applying to college more guidance about where they can be accepted and afford to go, and also about job availability in the fields they are choosing.
• Third, give community colleges (and other schools attended by disadvantaged students) more resources, but also hold them more accountable for outcomes, including academic completion rates and earnings afterwards. Give colleges that have higher graduation rates (adjusting for the quality of their students) and generate higher earnings for graduates higher state subsidies, increasing the incentive to offer high-quality instruction in high-demand fields and the necessary supports.

Finally, since the low academic preparation of so many high school students and the ineffective remediation in so many community colleges with fairly open admissions both help keep AA completion rates very low, boosting those rates and reforming developmental education should rank high on our research and policy agendas.

Harry J. Holzer is an AIR Institute Fellow and co-principal investigator and senior research fellow at the National Center for Analysis of Longitudinal Data in Education Research (CALDER).