PEORIA MAGAZINE August 2023

ECON CORNER

David Cleeton (DC): While there are innumerable forms of returns to higher education in terms of knowl edge attainment, including better appreciation of literature and the arts, improved social skills, and expertise acquisition conducive for lifelong learning, you have asked me to look at monetary returns when modeling higher education as an investment. Like any investment, a proper evaluation requires looking at the magnitudes and time distribution of the costs balanced against the benefits of higher future earnings. The decision to attend college postpones employment and incurs net tuition and fees up front and perhaps higher room and board expenditures. The return is usually realized in the form of higher wages and salaries post degree completion, continuing for the remainder of the working life. And, of course, we must factor into the analysis the repaying of net borrowing costs to finance college expenditures. We know that realized positive in vestment returns continue to exist for the college graduate in the median position. If we measure the ratio of net income at age 30 of a person attending college to that of a high school graduate of the same age, the ratio is nearly two to one (as of 2018-19) at the median of the distribution. However, there exists a huge amount of variation around this central tendency. Among the top 10% of earners, the ratio increases by nearly 40%, while among the lowest 10% of earners, the ratio drops by around 25%. There are also significant disparities across alternative categories of higher education institutions. The data from public institutions over the same period shows the following earnings ratios at the 25th, 50th and 75th

W elcome to Peoria Mag azine ’s Econ Corner, a recurring feature in which we pose questions to experts about various economic issues and how they affect our lives and careers here in central Illinois. Our guest this month is Dr. David Cleeton , chairman of the Department of Eco nomics at Illinois State University. Peoria Magazine (PM): There has been a fair amount of scholarship on the economics of education. Much as the bumper sticker “My kid beat up your honor roll student” was popular once upon a time, is there any doubt as to the link between educational attainment and an economic payoff down the road on a variety of fronts? What are some of those economic dividends — in lifetime wages, for example?

An Interview with Dr. David Cleeton Chairman of the Department of Economics at Illinois State University

INTERVIEW BY MIKE BAILEY

100 JULY 2023 PEORIA MAGAZINE