Investing in the Workforce: The Impact of Performance-Based Funding on Student Earnings Outcomes

A growing number of states use performance-based funding (PBF) systems to tie appropriations to student outcomes. Yet while many studies have examined the effects of PBF on enrollment and completion outcomes, no research has considered whether PBF affects post-college outcomes. This is of particular importance as more states directly incentivize colleges to improve student earnings and have students major in high-demand fields. We used the first detailed longitudinal dataset of state PBF policies to examine the effects of PBF on student earnings and found some modest positive effects concentrated among students who were already enrolled in college when PBF was first implemented. However, these small increases could also reflect other trends occurring prior to the implementation of PBF and analyses show this increase was not sustained among later cohorts.