2012 Reports

Labor Market Returns to Sub-Baccalaureate Credentials: How Much Does a Community College Degree or Certificate Pay?

Dadgar, Mina; Trimble, Madeline Joy

This study provides one of the first estimates of the returns to different types of community college credentials--short-term certificates, long-term certificates, and associate degrees--across different fields of study. We exploit a rich dataset that includes matched, longitudinal college transcripts and Unemployment Insurance records for students who entered a Washington State community college in 2001-2002, and we use an individual fixed effects identification strategy to control for both observed and unobserved student characteristics that are time invariant. We find that earning an associate degree leads to positive increases in wages in almost every field (compared with earning some credits but not obtaining a credential), but that the magnitude of these effects varies greatly by field. For example, while earning an associate degree in the humanities and social sciences increases earnings by 5 percent for women, earning an associate degree in nursing increases women's earnings by 37 percent. Further, our analysis by field of study reveals that the returns to associate degrees are higher than the returns to long-term and short-term certificates within almost every field, but that a larger proportion of long-term certificates tend to be offered in high-return fields. Our findings also suggest that, unlike associate degrees and long-term certificates, short-term certificates have little or no effect on wages in most fields of study when compared with earning some credits and leaving college without a credential. Finally, the impact of credential receipt on the probability of employment and on hours worked per week is at least as significant in magnitude as the impact on wages. This suggests that part of the returns to earnings estimated in previous literature results from the greater employability of students who earn a credential rather than from increases in human capital as measured by wages.