Is college worth it? What is the value of an undergraduate or graduate degree in relation to the substantial investment in time and money required to earn it? Perhaps it is to expand your skill set so you can move up in your company or to change careers. Or maybe you want to set an example for your children and to give back to your community. For many of us, however, at least part of our motivation to earn an advanced degree is to earn a higher income. All of these benefits can make college worth it, but their “returns on investment” can be difficult to measure.
In an earlier ValuED blog, Dr. Jennifer Jill Harman explored the benefits of factoring in personal fulfillment when determining the value of a degree. While this is important, we economists tend to focus on the financial returns of education. We measure these as the differences in income as well as the differences in unemployment rates of those who have a college degree compared to those who don’t. To help with this calculation, we can look at data from the Bureau of Labor Statistics (BLS). The BLS is the Federal agency that keeps track of all kinds of numbers that are related to activity in the labor market such as job growth, unemployment, and wages.
*All data are for full-time wage and salary workers who are age 25 and over.
Source: BLS http://www.bls.gov/emp/ep_table_001.htm
Let’s first look at median earnings. Clearly, annual income has a tendency to increase as education levels increase. If you have taken some college courses or earned an associate’s degree and are thinking about degree completion, you can make some real financial gains . As you can see, median income jumps by nearly 43% once you complete your bachelor’s, which is nearly $17,000 a year. If you have your bachelor’s and then complete a master’s, median income increases by another 20%, or about $12,000 a year. This makes sense, because with an advanced degree, you gain specialized skills and in-depth expertise—things in which employers are willing to invest, as they see great value in them.
What about the unemployment rate? The data show that those with a degree have lower unemployment rates than those who don’t, often much lower. With your degree, you will more likely have a job that offers more stability and benefits than you would have without a degree. Lower unemployment means that you will have more steady work throughout your life, which usually results in more financial stability and less job uncertainty for you and your family.
So, is college worth it? By looking at these data related to the financial returns of education, it’s evident that college is generally a smart investment. In general, you earn higher wages and you experience lower levels of unemployment. But you have to temper your excitement a bit because the data we are looking at are reported at median income, which means that there are an equal number of workers earning a higher and a lower income than the median. In other words, some college graduates earn a lot more than $57,616 and some earn a lot less. This is the idea that not all jobs (and degrees) end up paying the same. Someone with a master’s degree could be a CEO or work at the local coffee shop.
You must also recognize that earning your degree is very costly—in terms of tuition and books, time, and family sacrifices. In a future blog post, these income differences and large variations in wages that exist between jobs will be explored further.
How important are wages and employment rates to you when you determine the value of a degree? Explore earnings in the U.S. further and start the discussion below.