73 Appendix 7: Value per credit and the Mincer function Appendices such, we reduce the estimated benefits by 10%. We use state-specific and education level-specific Mincer coefficients. Figure A7.1 illustrates several important points about the Mincer function. First, as demonstrated by the shape of the curves, an individual’s earnings initially increase at an increasing rate, then increase at a decreasing rate, reach a maximum somewhere well after the midpoint of the working career, and then decline in later years. Second, individuals with higher levels of education reach their maximum earnings at an older age compared to individuals with lower levels of education (recall that age serves as a proxy for years of experience). And third, the benefits of education, as measured by the difference in earnings between education levels, increase with age. In calculating the alumni impact, we use the slope of the curve in Mincer’s earnings function to condition the $295 value per CHE to the students’ age and work experience. To the students just starting their career during the analysis year, we apply a lower value per CHE; to the students in the latter half or approaching the end of their careers we apply a higher value per CHE. The original $295 value per CHE applies only to the CHE production of students precisely at the midpoint of their careers during the analysis year. When calculating the student return on investment, we again apply the Mincer function, this time to project the benefits stream of the FY 2021-22 student population into the future. Here too the value per CHE is lower for students at the start of their career and higher near the end of it, in accordance with the scalars derived from the slope of the Mincer curve illustrated in Figure A7.1. Figure A7.1: Lifecycle change in earnings Earnings Age 12 years of education 14 years of education 16 years of education
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