I once had a conversation with a young journalism school graduate who told me he wanted to make more money. His sole argument for a higher wage was that he had a good friend whose salary was much higher.
“What does your friend do?” I asked.
“He’s an engineer,” was the reply.
The fact that my young reporter could not understand why his entry level pay was not equivalent to that of an engineer indicated he didn’t pay attention in his economics classes.
Economist Thomas Sowell explains it this way in his book Basic Economics: “It is not merely the fact that engineers are scarce that makes them valuable. It is what an engineer can add to a company’s earnings that makes an employer willing to bid for his services—and sets the limit to how high the bids can go.”
Therefore critical factors in acquiring a well-paying job include how much an individual knows and whether that knowledge can add to the success of the employer. While demand is clearly key, the fundamental baseline for success starts with education.
A new report from the U.S. Bureau of Labor Statistics concludes that, “Few things affect people’s earning power more than their level of education. In general, more education means more dollars earned.”
For example, the 2014 median weekly earnings for workers with at least a bachelor’s degree were $1,193, nearly three times as high as person with less than a high school diploma ($488). High school graduates with no college earned an average of $668 a week, according to the BLS. Workers with some college or an associate degree earned $761 per week.
BLS figures show that since 1979, median weekly earnings for individuals with less than a high school education have consistently trended downward, while pay for workers with a bachelor’s degree or higher have generally risen (though they have stagnated in the last 15 years… a legitimate cause for concern among people with college degrees).
Sowell says there is no collective societal determination as to how much an individual’s work is worth, despite all the clamoring for the nebulous “living wage.” Says Sowell, “In a market economy, those who get the direct benefit of an individual’s work decide how much they are prepared to pay for what they receive.” In turn, the employee decides whether to work for that pay.
Employees who have higher levels of education often use more sophisticated equipment that makes them more productive so they can then command higher pay.
Advanced education is not a guarantee of higher pay, but as the BLS research shows, there is a distinct correlation between knowing more and earning more.