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Education and Life time wage potential. Chapter 9 Part 1. 40% 30% 20% 10% 0%. MALE FEMALE. PERCENT COLLEGE GRADUATES. 1940 1950 1960 1970 1980 1990 2000. PERCENT COLLEGE GRADUATES AMONG MEN AND WOMEN, AGE 25-34, 1940-2002.

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slide3

40%

30%

20%

10%

0%

MALE

FEMALE

PERCENT COLLEGE GRADUATES

1940 1950 1960 1970 1980 1990 2000

PERCENT COLLEGE GRADUATES AMONG MEN AND WOMEN, AGE 25-34, 1940-2002

life cylce labor force participation rates for white women by age and birth cohort table 9 1 p 325
LIFE CYLCE LABOR FORCE PARTICIPATION RATES FOR WHITE WOMEN BY AGE AND BIRTH COHORTTable 9.1, p. 325
slide7

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

$0

MEAN

EARNINGS

HIGH SCHOOL GRAD

COLLEGE GRAD

15 25 35 45 55 65

AGE

MEAN EARNINGS BY AGE AND EDUCATION, WOMEN, YEAR-ROUND FULL-TIME WORKERS, 2001

Figure 9.1, p. 316

life earnings by education level
Life Earnings by Education Level
  • High School 1.36 million
  • Vocational Degree 1.71 million
  • College Degree 2.31 million
  • Master’s Degree 2.81 million
  • Ph. D. 3.75 million
  • Professional Degree 4.29 million
slide9

INTERNAL RATES OF RETURN FOR WOMAN’S COLLEGE EDUCATION WITH DIFFERENT WORK FORCE PATTERNS

Figure 9.2, p. 317

the educational investment decision
The Educational Investment Decision
  • Opportunity Cost of College Career
  • Direct vs. Indirect Cost of College
    • Direct
      • College Tuition
      • Books
      • Fees
    • Indirect
      • Forgone wage during school years
the educational investment decision1
The Educational Investment Decision

College Graduate

Gross Benefits

High School Graduate

Direct

Costs

Indirect

Costs

47 yrs

the educational investment decision with discontinuous worker
The Educational Investment Decision with Discontinuous Worker

College Graduate

Gross Benefits

High School Graduate

Direct

Costs

Indirect

Costs

47 yrs

so what is the present value
So what is the Present Value
  • First, what is Present Value
slide15

So what is the Present Value if the Future Value is growing

  • What if Value in Future has a growth rate

years

+

Number of

Value

in

the

Future

(

1

growth

rate

)

=

+

number

of

years

rate

(

1

interest

)

slide17

So what is the Present Value if the Future Value is growing at different rates between those with college degree and those with no college degree

  • What if Value in Future has a growth rate
examples
Examples
  • In the following examples a few assumptions are made:
    • College cost is covered strictly from de-saving
    • Person taking off from work returns to exact wage prior to leaving work
slide20

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

0

$25,000.00

-$15,000.00

-$15,000.00

-$40,000.00

-$40,000.00

$0.00

1

$24,299.07

-$14,018.69

-$14,018.69

-$78,317.76

-$78,317.76

$0.00

2

$23,617.78

-$13,101.58

-$13,101.58

-$115,037.12

-$115,037.12

$0.00

3

$22,955.60

-$12,244.47

-$12,244.47

-$150,237.19

-$150,237.19

$0.00

4

$22,311.99

$43,075.55

$43,075.55

-$129,473.62

-$129,473.62

$0.00

5

$21,686.42

$43,880.70

$43,880.70

-$107,279.34

-$107,279.34

$0.00

6

$21,078.39

$44,700.90

$44,700.90

-$83,656.82

-$83,656.82

$0.00

7

$20,487.40

$45,536.44

$45,536.44

-$58,607.79

-$58,607.79

$0.00

8

$19,912.99

$46,387.58

$46,387.58

-$32,133.20

-$32,133.20

$0.00

9

$19,354.68

$47,254.64

$0.00

-$4,233.24

-$51,487.88

-$47,254.64

10

$18,812.03

$48,137.91

$0.00

$25,092.64

-$70,299.91

-$95,392.55

slide21

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

11

$18,284.59

$49,037.68

$0.00

$55,845.73

-$88,584.50

-$144,430.23

12

$17,771.94

$49,954.27

$0.00

$88,028.07

-$106,356.43

-$194,384.50

13

$17,273.66

$50,888.00

$0.00

$121,642.41

-$123,630.09

-$245,272.50

14

$16,789.35

$51,839.17

$0.00

$156,692.23

-$140,419.44

-$297,111.67

15

$16,318.62

$52,808.13

$0.00

$193,181.74

-$156,738.06

-$349,919.80

16

$15,861.09

$53,795.20

$0.00

$231,115.85

-$172,599.15

-$403,715.00

17

$15,416.39

$54,800.72

$0.00

$270,500.18

-$188,015.53

-$458,515.72

18

$14,984.15

$55,825.03

$0.00

$311,341.06

-$202,999.68

-$514,340.74

19

$14,564.03

$56,868.49

$24,021.86

$353,645.51

-$193,541.85

-$547,187.37

20

$14,155.70

$57,931.45

$24,470.87

$397,421.27

-$183,226.68

-$580,647.95

slide22

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

21

$13,758.81

$59,014.28

$24,928.27

$442,676.74

-$172,057.22

-$614,733.96

22

$13,373.05

$60,117.35

$25,394.22

$489,421.04

-$160,036.05

-$649,457.09

23

$12,998.10

$61,241.04

$25,868.88

$537,663.98

-$147,165.27

-$684,829.25

24

$12,633.67

$62,385.73

$26,352.41

$587,416.05

-$133,446.53

-$720,862.58

25

$12,279.45

$63,551.82

$26,844.98

$638,688.41

-$118,881.01

-$757,569.42

26

$11,935.17

$64,739.71

$27,346.75

$691,492.95

-$103,469.43

-$794,962.38

27

$11,600.54

$65,949.79

$27,857.91

$745,842.20

-$87,212.06

-$833,054.27

28

$11,275.29

$67,182.50

$28,378.61

$801,749.41

-$70,108.74

-$871,858.15

29

$10,959.16

$68,438.25

$28,909.06

$859,228.50

-$52,158.84

-$911,387.34

30

$10,651.89

$69,717.47

$29,449.41

$918,294.07

-$33,361.33

-$951,655.40

slide23

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

31

$10,353.24

$71,020.60

$29,999.87

$978,961.43

-$13,714.70

-$992,676.13

32

$10,062.97

$72,348.08

$30,560.61

$1,041,246.54

$6,782.94

-$1,034,463.60

33

$9,780.83

$73,700.39

$31,131.84

$1,105,166.10

$28,133.96

-$1,077,032.15

34

$9,506.60

$75,077.96

$31,713.74

$1,170,737.47

$50,341.10

-$1,120,396.37

35

$9,240.06

$76,481.29

$32,306.52

$1,237,978.70

$73,407.57

-$1,164,571.13

36

$8,980.99

$77,910.85

$32,910.38

$1,306,908.56

$97,336.96

-$1,209,571.60

37

$8,729.19

$79,367.12

$33,525.53

$1,377,546.49

$122,133.31

-$1,255,413.19

38

$8,484.44

$80,850.62

$34,152.18

$1,449,912.67

$147,801.04

-$1,302,111.63

39

$8,246.56

$82,361.85

$34,790.53

$1,524,027.96

$174,345.01

-$1,349,682.95

40

$8,015.35

$83,901.32

$35,440.82

$1,599,913.93

$201,770.49

-$1,398,143.44

slide24

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

41

$7,790.62

$85,469.57

$36,103.27

$1,677,592.88

$230,083.14

-$1,447,509.74

42

$7,572.19

$87,067.13

$36,778.10

$1,757,087.82

$259,289.04

-$1,497,798.78

43

$7,359.89

$88,694.56

$37,465.54

$1,838,422.49

$289,394.69

-$1,549,027.79

44

$7,153.54

$90,352.40

$38,165.83

$1,921,621.35

$320,406.99

-$1,601,214.36

45

$6,952.97

$92,041.23

$38,879.21

$2,006,709.61

$352,333.23

-$1,654,376.38

College

HS

Continous

Non-Continous

Total

$650,630.41

$2,657,340.03

$1,002,963.64

% of HS

100.00%

408.43%

154.15%

% of C-Cl

24.48%

100.00%

37.74%

slide26

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

41

$37,151.87

$407,586.88

$172,169.10

$5,197,072.96

$1,212,819.50

-$3,984,253.46

42

$37,512.57

$431,329.80

$182,198.37

$5,590,890.19

$1,357,505.30

-$4,233,384.89

43

$37,876.77

$456,455.81

$192,811.87

$6,009,469.23

$1,512,440.40

-$4,497,028.84

44

$38,244.51

$483,045.47

$204,043.63

$6,454,270.20

$1,678,239.52

-$4,776,030.68

45

$38,615.81

$511,184.04

$215,929.66

$6,926,838.43

$1,855,553.37

-$5,071,285.06

College

HS

Continous

Non-Continous

Total

$1,441,044.39

$8,367,882.82

$3,296,597.76

% of HS

100.00%

580.68%

228.76%

% of C-Cl

17.22%

100.00%

39.40%

slide28

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

41

$2,507.30

$27,507.20

$11,619.34

$776,708.11

$18,204.15

-$758,503.97

42

$2,370.54

$27,257.13

$11,513.71

$801,594.70

$27,347.31

-$774,247.39

43

$2,241.24

$27,009.34

$11,409.04

$826,362.80

$36,515.11

-$789,847.69

44

$2,118.99

$26,763.80

$11,305.32

$851,007.61

$45,701.44

-$805,306.17

45

$2,003.41

$26,520.49

$11,202.54

$875,524.69

$54,900.57

-$820,624.12

College

HS

Continous

Non-Continous

Total

$423,607.59

$1,299,132.28

$478,508.16

% of HS

100.00%

306.68%

112.96%

% of C-Cl

32.61%

100.00%

36.83%

slide30

College

Cumulative

Difference

Year

HS

Continous

Non-Continous

Con-HS

Ncon-Hs

Ncon-Con

41

$7,790.62

$27,218.59

$15,198.72

$561,102.21

-$98,536.63

-$659,638.84

42

$7,572.19

$26,964.21

$15,056.67

$580,494.23

-$91,052.15

-$671,546.38

43

$7,359.89

$26,712.21

$14,915.96

$599,846.55

-$83,496.08

-$683,342.63

44

$7,153.54

$26,462.56

$14,776.55

$619,155.57

-$75,873.06

-$695,028.63

45

$6,952.97

$26,215.25

$14,638.46

$638,417.85

-$68,187.57

-$706,605.42

College

HS

Continous

Non-Continous

Total

$650,630.41

$1,289,048.26

$582,442.84

% of HS

100.00%

198.12%

89.52%

% of C-Cl

50.47%

100.00%

45.18%

how will this change if
How will this change if
  • Time taking off from work increases?
  • College Cost Increases?
  • There is a college debt?