An economics professor has found that your salary straight of college sets the tone for the rest of your career — and that your college often sets the tone for your salary.
Invited to address a conference on human capital and mobility hosted by the Federal Reserve Bank of Minneapolis, Swarthmore College Professor of Economics Philip Jefferson used Payscale.com data collected by John Calia, his student and collaborator, on starting and mid-career salaries from the graduates of nearly 1,000 educational institutions. He wanted to know if it was possible for someone to move up the income ladder within their lifetime and if that correlates with what college they attended, Swarthmore reports on its News & Events page.
He found that if you only get a bachelor's degree, the college you attend has a measurable effect on how much money you make, both immediately after graduation and for the rest of your working life. As he puts it, "if you are behind someone early in their career, by the time you get to mid-career, you are still going to be behind that person. And the only way you could have caught up was by going to a different school."
Jefferson explains: "What we showed is that the relationship between early-career pay and mid-career pay is linear and positively sloped. ... Once you graduate from a school, you were not going to be able to catch up to somebody that graduated from a different school who started with a different pay.
"If you start out 10 percent behind, you are still going to be 10 percent behind mid-career."
"The school you attended really matters," he tells CNBC Make It. Certain colleges set up new grads for high salaries in the short and long term.
A bachelor's degree from Harvard, Princeton or Stanford sets you up to make an impressive starting salary, Jefferson finds. Other schools that produce better-than-average results, according to his analysis, include Bates College, Occidental College and SUNY-Maritime College.
Several of those institutions also made CNBC Make It's 2017 list of the 30 colleges where students go on to make the most money.
Schools that produce lower-than-average results, Jefferson finds, include Endicott College, Miami Dade College, Iowa State University and the Massachusetts College of Art and Design.
If you start out 10 percent behind, you are still going to be 10 percent behind, mid-career.Philip JeffersonProfessor of Economics, Swarthmore College
"I was surprised" by the data, Jefferson says. "Before, I adhered to the view that, if you're talented, the school doesn't matter." And, he adds, in some cases, that is true. But, largely, it seems clear that the college you choose can make a substantial difference in terms of how much money you'll be able to make.
Given how expensive it is to get a B.A. these days, it makes sense to ask whether you're likely to get a good return on your investment. Forty-four million Americans have accrued a student loan burden of $1.4 trillion, and recent research shows a majority of borrowers, 60 percent, will still probably be making loan payments in their 40s.
As CNBC reports, "on average, more than 3,000 borrowers default on their federal student loans every day."
Bearing that in mind, and knowing what he knows now, Jefferson would advise high schoolers to "include salary data" in their considerations. "I'd never say look only at salary data," he says. But it should be looked at "as part of a portfolio" of facts about a possible school.
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