The Relative Returns to Credit- and Non-Credit- Bearing Credentials

By Candace Hester and Sami Kitmitto – Published October 2020 by American Institutes for ResearchSubscribe to the WFMonitor eNewsletter

This American Institutes for Research (AIR) paper compares non-credit-bearing credentials to credit-bearing credentials as they relate to middle-skill jobs. From analyzing 20 years of data in the 1997 National Longitudinal Survey of Youth, researchers found “credit-bearing credentials yield an approximately equal likelihood of employment as non-credit bearing credentials, but significantly improved earnings of about 17%, which typically equates to about $5,500 per year.”

Background
In our modern economy, decent jobs require some form of a postsecondary education credential. In relation to middle-skill jobs, a large portion of skills and training gaps exist that require learners to earn a postsecondary credential, but not the completion of a 4-year degree. 

The market for middle-skill training is volatile with lots of change occurring. For example, IPEDS calculations revealed that learners “completing less-than-2-year certificate programs at for-profit colleges increased by more than 500% between 1990 and 2011, whereas the comparable statistic at public institutions was less than 200%.” However, for-profit enrollments in such programs declined substantially by 2017-2018.  

The literature on earnings outcomes for learners focuses primarily on 4-year degrees. To achieve a more complete view of the middle-skill credential landscape, earnings outcomes of credit-bearing credentials were contrasted with non-credit credentials. This distinction is related to varying career earnings for students in part because credit-bearing credentials offer long-term paths to 2- and 4-year degrees that non-credit credentials do not. 

Results of Middle-Skill Education & Training Gaps
Based on a 2015 estimate, 16% of jobs in the U.S. are low-skill (not requiring any postsecondary education), 31% are high-skill (requiring a 4-year degree) and 53% are middle-skill. However, only 43% of the workforce have middle-skill job capabilities – the end result of education and training gaps for middle-skill workers. Consequently, “middle-skill careers with high lifetime values, such as health care, computer and mathematical operations, and technical sales and management,” are increasingly being filled by individuals with 4-year degrees. In addition, according to a 2014 Harvard Business School report, employers are upskilling job postings (requiring a 4-year degree for middle-skill positions) to recruit candidates with “the necessary technical (e.g., computer literacy) and soft (e.g., work ethic) skills.”

Middle-Skill Earnings Premium for Completing a Credential
“A 2011 Georgetown CEW study found the median lifetime earnings potential of a middle-skill employee to be $1.7 million, which is more than half a million higher than their counterparts with only a high school diploma.” A 2017 CAPSEE report found a $4,640–$7,160 per year premium in earnings for individuals with a completed credential compared with individuals “entering college but not completing a degree or certificate.” 

For-Profit Institutions
Based on research from the National Bureau of Economic Research, Journal of Policy Analysis and Management, Journal of Economic Perspectives, United States Government Accountability Office, and Labour Economics, for-profit institutions “expressly recruit students from low-income backgrounds, charge tuition as much as five times higher than students pay at community colleges, encourage students to take out large loans, and provide equivalent or worse labor market outcomes than their public or nonprofit counterparts.” 

Earning Outcomes of Non-credit vs. Credit-bearing Credentials
From the 1997 National Longitudinal Survey of Youth, a sample of 6,093 respondents was used to track individual career earnings over a 20-year period. The study’s purpose was to determine if average earnings outcomes from non-credit credentials differed from credit-bearing credentials. The researchers found that although non-credit credential earnings could outperform credit-bearing credentials in the short-term, credit-bearing credentials on average had significantly higher long-term returns over the course of an individual’s career. 

Conclusion
Credit-bearing credentials offer long-term flexibility. Individuals who have obtained credits from an accredited institution on course to a 2-year certificate are more likely to eventually attain a 4-year degree, giving access to higher earning premiums. More research is needed to determine why individuals choose to earn non-credit credentials over credit-bearing credentials and whether it is primarily because of financial considerations. In addition, “employers, state, and workforce regulation boards should consider gathering ongoing evidence on the experiences and outcomes of diverse students’ in a range of training programs to enhance their understanding of the ability for a range of programs to serve them well.”    

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