Higher Education

The Value of the College Premium—and the Marriage Premium

July 2, 2014

J. Scott Moody, Wendy Warcholik, Ph.D.

There is a lot of discussion in the mainstream media about the “college wage premium”—the benefit gained by earning a college diploma in terms of one’s long-term earning potential. Going to college provides many benefits to an employer, such as increased skills and a signal of work effort. In economic terms, college reshapes a person’s life by increasing his or her productivity, which higher productivity leads to higher earnings.

However, obtaining a college diploma is not the only life-altering event that can reshape a person’s life. Another major event is starting a family, which begins with marriage. After marriage, behavior often changes for the better, especially for men, as a person takes on the added responsibility of caring for a household. While harder to quantify, married people are more productive, as shown by higher earnings.

Unfortunately, the “marriage wage premium”—the earnings boost stemming from marriage—is not as widely discussed, or lauded, as the college wage premium.

We recently examined data from the U. S. Bureau of Labor Statistics (BLS) Current Population Survey as published in the October 2012 report, “Highlights of Women’s Earnings in 2012.” The data in the two nearby tables show a significant boost in earnings from marriage. Indeed, for the majority of workers the boost exceeds that of going to college.

Table 1 shows the median weekly earnings of all workers in America in 2012. A person with a high school diploma earns $652 per week while a person with at least a bachelor’s degree earns $1,165 per week—a difference of 79 percent. The college premium is also higher for men than it is for women.

Table 1 also shows the median weekly earnings of people who have never been married at $609 per week while a married person earns $880 per week—a difference of 44 percent. The marriage premium is also higher for men than it is for women.

However, the majority of America’s employed work on an hourly basis (59 percent). These workers tend to be blue collar and thus middle class. For these workers, the situation is very different, as shown in Table 2.

A person with a high school degree earns $13.58 per hour while a person with at least a bachelor’s degree earns $18.18 per hour—a difference of 39 percent. The college premium is also higher for women than it is for men.

Table 2 also shows the median hourly earnings of people who have never been married at $10.16 per hour while a married person earns $14.99 per hour—a difference of 48 percent. The marriage premium is also higher for men than it is for women.

It is very interesting how the marriage premium, on a percentage basis, is actually higher for the majority of working Americans—yet marriage gets so little attention in the media. There is significant social and human capital formation that occurs within a marriage—interpersonal skills, dependability, reliability, integrity, flexibility, and motivation, to name just a few—that has tremendous economic value in the workplace (see the Energy Industry Competency Model).

To further illustrate the economic value of marriage, the data also show the impact on earnings from divorce. For both median weekly earnings and median hourly earnings, a person that has been through a divorce suffers a decline in economic productivity (-12 percent for weekly earnings and -5 percent for hourly earnings). In both cases, the negative impact is highest for men.

An important extension of this work would be to further disaggregate the data to better ensure an apples-to-apples comparison. The workers represented actually fall into each of these classifications in different proportions, thus biasing the results. (For instance, “never married” individuals likely represent a greater proportion of “high school graduates,” which makes it less clear which factor is driving the lower earnings.) Even so, these data from the BLS study are enlightening.

Many people lament the fading of the “American Dream” of living a solid middle-class lifestyle, but fail to connect the decline of the American Dream with dramatic increases in divorce and cohabitation. Both cases result in lower household earnings and erode the middle class. Society simply cannot discard the marriage earnings premium without expecting to pay a steep economic cost.

OCPA research fellow J. Scott Moody (M.A., George Mason University) has worked as a public policy economist for more than 17 years. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”

‘Why Do Economists Urge College, But Not Marriage?’

That’s a question Megan McArdle raises over at The Daily Beast.

“College improves your earning prospects,” she writes. “So does marriage. Education makes you more likely to live longer. So does marriage. Yet while many economists vocally support initiatives to move more people into college, very few of them vocally favor initiatives to get more people married.”