Published: October 2019
The enrollment in colleges and universities has increased significantly since 1992. Over 27 years, the U.S. labor force has gone from
27.89 million workers with a bachelor's degree to 58.7 million or an increase of approximately 110%.
Almost 70% of 2016 high school graduates will attend college. This increase in higher education has led to vacancies in "middle skill" careers. Middle skill jobs are defined as "those that require more than a high school diploma but less than a four-year degree." Career Training Education or CTE has been offered as a solution to fill this economic need. This narrative explores the return to the state of Utah from these programs offered by the Utah System of Technical Colleges (UTech).
Technical colleges have seen significant growth in funding and certificates awarded since 2011...
Growth in appropriations
In order to fund the new programs, the budget for UTech programs has increasd. Since 2011, the funding for these programs have gone up from $49.32 million to $95.46 million in tax appropriated funds in 2019. This is a real dollar increase of 40.97%.
Growth in graduates
These funds have been used to assist thousands of students achieve a CTE certificate. Graduates in these programs have risen from 4,786 in 2011 to 6,218 in 2017. The period of decrease, from 2016 to 2017, can be attributed to a change in the definition of a graduate in conjunction with the discontinuation of some short-term programs in favor of longer programs.
UTECH GRADUATE WAGES
When wage data is considered for graduates, two categories were used: long-term and short-term certificates. Long-term certificates include programs
requiring 900 or more membership hours while short-term programs require less than 900 hours.
To understand how obtaining a certification impacts earnings, the wages of graduates were measured one year before completion of a UTech program. The following wages are reported for the 2016 graduating cohort.
Certification from a technical college increases wages for the average graduate...
Students completing a short-term certificate had average annual wages of $21,789 four quarters before enrollment. Completers of long-term certificates had an average wage of $18,390 for the same period.
Why is there a difference?
Differences in pre-certification wage by certificate type may occur because short-term earners were likely working more before their enrollment, while long-term earners may have worked less in the same time period since they were already enrolled and focused on their certificate program.
Post-certification wage, or wage four quarters after graduation, was also measured.
The lighter bars represent the estimated impact of certification on wages.
On average, long-term completers saw an average wage increase of $12,412 annually. Those achieving short-term certificates saw an increase of $8,669.
In 2016, UTech awarded 7,056 certificates, which added an estimated $68.3 million to Utah wages.
Additional Utah wages generate more income tax revenue for the state. The size of revenue impacts the payback period length for appropriated money.
A payback period is "the period of time required for the profit or other benefits of an investment to equal the cost of the investment." In other words, it is the time needed to fully recuperate the cost of the investment.
How is the payback period calculated?
Keep scrolling down to view animation.
State dollars are
Total UTech Appropriations in 2015
UTech uses appropriated
funds to administer
programs and award
Increased wages following
graduation leads to
more income tax paid.
The payback period is
the time it takes for
these taxes to cover the
cost of the initial investment.
The research used two payback period models...
Payback period for model one
The first model calculated the payback period of every graduating class from 2011 to 2015. Pre- and post-certification wage were used in the calculation. Overall, an average of 10.18 years passed before initial funding was paid back. The fastest payback period with this model was in 2013 of 9.81 years while the payback period that took the longest was in 2011 with 10.7 years.
Payback period for model two
The second model also considers the 2011-2015 cohorts. However, instead of pre-certification wage, this model uses Census Bureau
wage estimates as a base.
The model resulted in an average payback period of 11.26 years. The shortest payback period was 10.07 years, while the longest was 12.8 years.
Ultimately, UTech programs increase wages, which in turn increases taxes collected by the state. It generally takes 10 to 13 years for the state to realize
a positive return on funding these programs.
The following tool allows for interactive exploration of the relationship between graduates and payback period length. The $5.2 million payback threshold
is based off the average appropriations of the 2011 - 2015 cohort.
Learn more about the ROI of UTech CTE programs
Learn more about the return on investment to the State of Utah from UTech's CTE programs in the full report. Explore the two models that calculated the payback periods and explore how UTech programs increase wages, which in turn increase taxes collected by the state.