The value of an education in today’s economy

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Matt Ferguson, CEO of CareerBuilder

The Great Recession caused many workers to reassess the true value of their education. After the global economy suffered unprecedented setbacks and pillars of business collapsed seemingly overnight, a college degree felt less powerful. Educated, experienced workers went from in-demand industries to looking for work in jobs with less certain career paths. In the new economy, students past and present began to wonder if their education equipped them with the skills they needed to find a secure job in this new economy, or if they were only saddled with student loan repayments. Our education system needs significant reform, including cost control for students, but education it is still an essential way to strengthen your career, especially in a competitive job market.

In “The Talent Equation,” a new book I authored with Lorin Hitt (Wharton School, University of Pennsylvania) and Prasanna Tambe (Stern School, New York University), we examine what employers can do to change the hiring environment and why education is fundamental to strengthening our labor force. Even in today’s recovering economy, education has retained its high value and is still the strongest step you can take in your career.

Lower chances of unemployment
Between 2007 and 2012, the unemployment level of U.S. workers rose as the nation grappled with the recession and its aftermath. Yet some workers fared better than others. In 2007, the unemployment rate for workers age 25 and older with less than a high school was 7.6 percent but jumped to 11.3 percent by 2012, according to the Bureau of Labor Statistics. However, workers with a high school diploma or equivalent had slightly better odds of employment with 4.5 percent unemployment in 2007 and 8.7 percent in 2012. Compare those figures to workers with some college or an associate degree, who were at 3.4 percent unemployment in 2007 and 6.5 percent in 2012. Meanwhile, workers who held a bachelor’s degree or higher experienced the lowest unemployment levels, with 2 percent in 2007 and 4.1 percent in 2012.

educational attainment

At first glance we see two important lessons: First, the recession had a profound effect on each group. Second, continuing education beyond high school has a positive effect on your likelihood of employment. Pair these lessons with recent CareerBuilder findings that 32 percent of employers are now hiring college graduates for positions that were historically held by high school graduates and you begin to understand the rising value of a degree.

Higher earning power
Higher education not only improves your employment odds; it can also put you on a higher earning track and show a powerful financial return on your education investment. For example, the following BLS data breaks down the 2012 median weekly earnings for all workers 25 or older by educational attainment:

  • Professional: $1,735
  • Doctoral: $1,624
  • Master’s: $1,300
  • Bachelor’s: $1,066
  • Associate: $785
  • Some college, no degree: $727
  • High school diploma: $652
  • Less than high school diploma: $471

Those figures are even more telling when you learn the average weekly wage for all workers is $815.

The college wage premium is the difference in earnings between workers with a college education and workers with only a high school degree. According to research from the Federal Bank of Cleveland, the wage premium for full-time workers with a bachelor’s degree or higher is about 1.8 times higher—up from about 1.4 in the early 1980s. Although the premium has flattened over much of the last decade, it is clear that, on average, college provides the best path to higher economic returns.

Lifelong returns on your investment
When you look at a lifetime of earnings over the course of your career, the difference in wages can be significant. In 2012, the Census Bureau released new data showing what workers with various degrees can expect to earn over the course of a lifetime based on occupation. Although these are estimates and limited by a number of factors, the data show a clear correlation between college programs and income potential.

Over a 40-year career, the median earnings for a worker with only a bachelor’s degree will be about $2.4 million. Meanwhile, workers who earn a bachelor’s degree in the following programs can expect to earn at least that, if not much more throughout their career:

  • Engineering: $3.5 million
  • Computers and math: $3.1 million
  • Business: $2.6 million
  • Physical science: $2.6 million
  • Social science: $2.5 million

The above Census Bureau study accounts for workers with a bachelor’s degree (and no additional degree attainment). Factor in the returns of advanced degrees and the wage premium looks even more attractive. For example, the median wages for workers with a bachelor’s plus a master’s, doctorate or professional degree are approximately 30 percent higher than workers with only a bachelor’s.

Workers in today’s economy might feel frustrated with the today’s competitive job market, and understandably so if they’ve been in the workforce long enough to remember when unemployment figures were lower. Fortunately, in a job market that has felt uncertain for too long, an education remains one item that rewards you today and will continue to gain value in the future.

Matt Ferguson is the CEO of CareerBuilder and author of “The Talent Equation: Big Data Lessons for Navigating the Skills Gap and Building a Competitive Workforce.” http://www.talentequationbook.com/

 

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