Going to College (Part 1): Education helps, but the degree matters!

Every now and then we hear the phrase “skilled workers” on the radio, in a news report, or in some political debate. But what does it mean, and how do their wages differ?

This isn’t necessarily a blue-collar phrase, nor is it a white collar. In fact, it just means these workers have specific/specialized training to be competent within their job role. This can be anything from a doctor to a machinist. However, in most cases it does indicate the individual has had some formal training. It might have been a vocational school, a 1-year junior college certificate program, or a 6-year Doctorate program. In any case, these individuals are considered skilled workers as they enter the labor force. The difference between each of these skilled workers, though, is their expected income.

To begin with, look at the graph below [2]:

https://www.bls.gov/careeroutlook/2018/data-on-display/education-pays.htm

I think most would predict that education and income have a positive relationship, and looking at our graph above it clearly does. This is to say, the higher your education the higher your income will likely be. It is also true that education has a positive effect on the unemployment rate.

Now, this post isn’t about influencing others to go to college and get the highest degree possible or push your children to do so. Instead, I’d like to focus on the difference in wages at each level because this will lead us to looking at the effectiveness of our “degree choice.”

The far-right column shows the expected rise in income as your education increases to the next level. There is a 36.92% wage increase for just getting a high school diploma, and we don’t see this large jump again until one completes a Bachelor’s degree over just having an associates.

This is just astonishing, and the jump is only larger when you look at someone who skips a step, such as going from a Bachelor’s to a Ph.D  where the wage increase is 48.59% (not referenced in the chart). And by the way, this is entirely possible depending on your major and schooling. In fact, some Ph.D   programs offer a Master’s degree as a “check point” so-to-speak.

Well what’s the big deal, and why do we care about these details if we expected that more education means more income? It’s more than just seeing the balance of deviation between each level of degree. Not all degrees are created equal, yes, I said it, and I’ll say it again, not all degrees are created equal!

First, let’s look at the cost of college in a general sense. Someone who has a Bachelor’s degree from their local state school could expect to pay somewhere between $20-40k. Of course, not all schools are within this range. Some programs can cost well over $100,000. However, someone who has a Ph.D could expect to pay at least another $48k in educational expenses.

So, in theory, this actually lines up quite well. Let’s look at an example, say someone who earns a B.S. in Economics and lands a job in San Francisco making $84,301 a year [1].  This wage is pretty standard for a Data/Research Analyst, basically a typical job for an Econ major. Now, let’s say this person goes to earn their Ph.D and lands a job as an Economist! To keep something constant, they are still working in San Francisco and their wage is now $153,300 [1]. In this example, this skilled worker increased their wages by 81.85% for getting a Ph.D. Comparing this to their expected wage increase, as stated earlier at 48.95% according to the BLS, we see a huge disparity.

This is what every student, parent, mentor, teacher, or school counselor should be taking from this post. The Bureau of Labor Statistics posted the average wages depending on the degree, from this we were able to identify the expected wage increase. However, these are averages and of course there are going to be degrees that don’t even come close to proving these numbers (also called outliers…for another post).

The important thing here though, is that we make responsible and logical decisions when choosing our college degrees and the amount we are willing to accept in student loans. Clearly an econ student who has $150k in student loans to get a Ph.D will be reimbursed quite quickly compared to other options.

In the end, your degree choice does matter when compared against the average. Not everyone can be an outlier on the high range of income, but it is important to have perspective before working towards a higher-level degree. Often times we might find that a Master’s or even a Ph.D doesn’t actually benefit us much due to the major. However, as we have seen from the average BLS numbers, degrees pay great dividends, you just need to earn the right one.

[1] “Salary of an Economics Major: How Much Do Graduates Earn?” Study.com, Study.com,study.com/articles/Salary_of_an_Economics_Major_How_Much_Do_Graduates_Earn.htm

[2] Torpey, Elka. “Measuring the Value of Education : Career Outlook.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, Apr. 2018, http://www.bls.gov/careeroutlook/2018/data-on-display/education-pays.htm

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