ECON First believes that business success centers around knowing the economic and demographic characteristics of their primary market area. While business experience, insights and intuition are important, they are substantially advanced by hard data.
The U.S. Bureau of the Census publishes annual data on the formal education attainment of the residents of states, counties and census tracts. Increasingly formal education is the major determinant of wages and is becoming a strong indicator of future economic growth.
EDUCATION AND INCOME
The educational attainment of adults in the U.S. has been steadily progressing since the 1950s. As of 2015 almost 30% of U.S. adults age 25 and older had a bachelor’s degree or higher. Another 8% had an associate’s degree and 21% had some college, but no degree.
Why the push toward more formal education? Simple…money.
According to the U.S. Bureau of Labor Statistics (2015), the median weekly earnings of full-time workers with a bachelor’s degree is 68% greater than those with only a high school diploma. This difference expands to 98% for adults with a master’s degree and 155% for adults with a professional degree.
And adults with more formal education are less likely to suffer unemployment. During 2015 the unemployment rate for adults with a high school degree averaged 5.4%. This fell to 2.8% for adults with a bachelor’s degree, 2.4% for a master’s degree, and 1.5% for those with a professional degree.
EDUCATION AND ECONOMIC GROWTH
Economists agree (amazing!) that the primary determinant of economic growth is increasing productivity. And the major drivers of rising productivity are new technology and innovation.
According to Stanford researcher Enrico Moretti there was a “Great Divergence” in the 1980s when the economic success of local economies was increasingly defined by their residents’ levels of education. Success shifted from an economy centered on producing physical goods to one centered on innovation and knowledge. Major gains in technology allowed manufacturing output to soar while the manufacturing job force was cut.
Innovative industries bring “good jobs” and high salaries, and have a local multiplier effect that is about three times larger than manufacturing. Jobs in the innovation sector encompass the high-tech sector, such as information technology, life sciences, robotics and nanotechnology. And they also include service industry jobs that make intensive us of human capital and technology.
EDUCATION AND SPENDING
Naturally, given the differences in salaries, household spending varies as the highest education level of any member moves from a high school diploma to a bachelor’s degree or more.
According to the latest Consumer Expenditure Survey, households with a member with a BA+ spend 112% a year more than households with a high school diploma as the highest degree.
This spending differential varies widely across consumer items.
BA+ households spend 54% more on food at home, but 129% on food away from home. BA+ households spend 188% more on alcoholic beverages and just 46% more on telephone services. They spend 120% more on furniture and only 48% more on major appliances.
BA+ households spend over 200% more on adult male and female apparel, and 122% more on new cars and trucks. They spend almost 600% more on fees and admissions to entertainment, but just 42% more on audio visual equipment and services.
NO TWO COUNTIES ALIKE
As with most demographic and economic characteristics, the levels of formal education vary considerably among market areas. In the state of Georgia, for example, the percent of adults with a bachelor’s degree or more runs from a high of 48% in Fulton County to a low of 15% in Barrow County. The proportion of adults in Bryan County, Georgia with a BA+ has jumped almost 14% over the past 15 years, while that proportion has declined in Clarke County.
ECON First specializes in providing the hard data that allows business owners to make more informed decisions regarding start-ups. expansion, marketing channels, and pricing strategies. The distribution and trends in adult formal education attainment at the county level are important insights to business owners with regard to consumer expenditure patterns and future economic growth.
Let ECON First help you to better understand your primary market.
Dr. John E. Stapleford