What the Migration of College Graduates Means for Earnings-Based Accountability
Earnings-based accountability metrics in higher education are intended to protect investments by students, families, and taxpayers. Programs in which students face high costs and debt, but that lead to jobs with earnings barely above what they would have earned absent the program, are seldom considered worthwhile investments. Accountability policies aim to promote greater return on educational investment by penalizing programs with low value (e.g., by cutting off access to forms of financial aid) and steering students toward higher-value programs.
To implement such accountability metrics, one must make an appropriate comparison: that is, what would the student have earned if they did not pursue the degree program? In practice, several recently proposed earnings-based accountability measures use the median earnings of high school graduates as the comparison benchmark. Because the cost of living and average wages vary substantially across the United States, adjusting for location when making such comparisons is wise. For example, prices in California are, on average, 10 percent higher than in Illinois. An individual earning $55,000 in California has the same purchasing power as someone earning $50,000 in Illinois. Accountability focused on graduates’ well-being needs to consider not only total earnings but also where graduates live, which determines how far a dollar stretches to cover their needs.
Recognizing this challenge, lawmakers in both the House of Representatives and the Senate have proposed adjustments of students’ earnings anchored to the location (either the state or metro area) of the college. The recently passed budget reconciliation law, which adopts accountability for degree programs, compares the earnings of graduates from each undergraduate program to the earnings of high school graduates in the same state as the institution, provided at least half of the students enrolled in the institution reside in that state. This approach is bipartisan—former President Biden’s Gainful Employment regulations employed a similar comparison. It has also been adopted by organizations outside of the government, like the American Council on Education.
This brief describes the complexities that the geographic mobility of college graduates creates for earnings-based accountability measures, necessitating adjustments like the ones in the reconciliation law. It further illustrates potential improvements to such measures by using data that characterize the destinations of graduates from specific colleges and universities.
