Policy makers are becoming increasingly concerned about the high percentage of students who attend postsecondary education without completing a degree. Researchers have studied numerous potential determinants of retention behavior for postsecondary students, such as financial aid, socioeconomic status, academic preparedness, academic and social integration, and expected future wages. However, none of these studies considers students’ earnings while in school as a potential determinant of retention.
This paper provides the first detailed empirical evidence of the labor-market returns to community college diplomas and certificates. Using detailed administrative data from Kentucky, we estimate panel-data models that control for differences among students in pre-college earnings and educational aspirations. Associate’s degrees and diplomas have quarterly earnings returns of nearly $2,000 for women, compared to returns of approximately $1,500 for men. Certificates have small positive returns for men and women in most specifications.
Despite evidence that skilled labor is increasingly concentrated in cities, whether regional wage inequality is predominantly due to differences in skill levels or returns is unknown. We compare Appalachia, with its wide mix of urban and rural areas, to other parts of the U.S., and find that gaps in both skill levels and returns account for the lack of high wage male workers. For women, skill shortages are important across the distribution. Because rural wage gaps are insignificant, our results suggest that widening wage inequality between Appalachia and the rest of the U.S.
