(BUSINESSWEEK) — One of the biggest arguments in favor of a college education is that college grads make more money than do those with only a high-school diploma or a few years of college. The difference in earning power over a lifetime—the college wage premium—has been well-documented: One of the most popular recent sources, a paper by Christopher Avery and Sarah Turner, estimated the gap at more than $500,000, on average.
Those last two words are more important than anyone gives them credit for. Focusing on the average college wage premium puts the emphasis on the expected gains from education, which is not a bad thing if you’re trying to persuade lots of people to go to college. But it’s only part of the story. College tuition is expensive, and plenty of students take on tens of thousands of dollars of debt in pursuit of that wage premium—when what matters just as much is how risky it is relative to other ways they might spend their money or time.
When we look at distribution of the college wage premium—how much more the lowest-, middle-, and highest-earning quartiles make relative to high-school grads, the picture of risk becomes clearer. At every level short of graduate school, there’s a not-insignificant chance that a successful high-school graduate will out-earn you. The chances are greatest for college dropouts—the people who spend some time and money but don’t walk away with a degree.