Essay on “Education are Good”

        The latest United States Census Bureau information quantifies what most graduate students already know: EDUCATION PAYS!  In the changing world of the “high tech/information age” the value and demand for “knowledge workers” is high and increases each time that there is advancement in an applied process.

        The latest information from the United States Census Bureau shows the different levels of expected total earnings over a 40 year work life.  In short, the more education that an individual obtains; the higher his or her work life income level will be.

Table 1

Total Expected Earnings Over a 40 year Work Life

Percent Differential

Highest Level of Education                   Expected Earnings         Over Previous Level

None – grade 8                                      $936,000                            -

9^th – 12^th grade                                     1,099,000                             17%

High School Graduate                        1,371,000                             24

Some College                                       1,632,000                             19

Associate Degree                 1,813,000                             11

Bachelor’s Degree                               2,422,000                             33

Master’s Degree                   2,834,000                             17

Professional Designation                     4,519,000                             46

Doctoral Degree                  3,525,000                          -15

Source: United States Census Bureau 1

        The income gap between levels of education has been increasing over the last 30 years.  In 1975 the difference in annual wages between a four year college graduate and a high school graduate was twenty-eight percent.  This differential grew to sixty-six percent in 2005.  As of 2001 the difference has grown to seventy six percent.  The differences over a work life are shown in table 2.

        There is also a noticeable gender differential.  Compared to a high school graduate, the percent increase in additional earnings is greater for females than for males.  As of 2012, males with a degree have approximately sixty-three percent additional earning power compared to their male counterparts with a high school diploma.  Females with a degree have approximately ninety four percent more earning power compared to their female counterparts with a high school diploma. ^{(Ref 1)}

A Masters Degree of “Education are Good” 

        The earnings gap between the educational levels is also rising.  In 1975 the multiple between the masters and a high school graduate was about 1.7 times.  By 1999 this had increased to 2.0 times.  In 2011 the differential had risen to 2.1 times.  This increase, rises with the rises in the individual’s ages.  The average premium for a master’s degree is about $6,900 between the ages of 25 to 29.  The average premium for a master’s degree increased to $12,000 in the 45 – 49 age range.  In demand areas, such as business, IT, and certain health care sectors (such as physician’s assistants) this multiple increases to approximately 3.4 times (and beyond).  The distribution of annual earnings also increases with more education.  In 2005, a high school graduate’s median annual earnings was $35,400 compared to $56,500 for a four year college graduate.  The mean annual earnings for a master’s degree during this time period was $70,000 (or higher).

        The United States Census Bureau does not break out the work life earnings based on specific master’s degrees.  However, the Graduate Management Admissions Council estimates that the average masters in business, from an AACSB accredited institution will increase an individual’s income by an average of 35 percent as compared to that same individual’s pre-MBA salary.  (Note: the author refers to a master in business from any area as an MBA for ease of reading/writing.  However, the content of this article is equally applicable to any of the masters degrees rewarded in business which include the areas of finance, accounting, economics, etc.).  Unfortunately, no estimate given on the value over a work life.  Additionally, the benefits of an MBA are more than just monetary.  An MBA separates an employee from the pack and may result in more interesting and challenging work, faster promotions and more individual opportunities.  The benefit of obtaining an MBA becomes both a quantitative and a qualitative issue.

        This additional training may lead to higher job satisfaction and if overall career tracks hold to its present course, higher remuneration.  These outcomes are generally different than the reasons given by most students choosing to enter an MBA program.  Students have, for the most part, reiterated the same couple of desires: 1) the need for more intensive and higher level training than they received at the undergraduate level and; 2) their undergraduate field of study is not remotely connected to their current (or future) employment areas.  Remember most students entering an MBA have a much clearer idea of what educational area they want to pursue.  Many of the better students entering an MBA program already have some years of work experience in their area, or an affiliated area, of interest and thus have a good idea of the job market and the demands of their future profession.  Employers also realize this differential and prefer MBA students with a few years of full-time employment experience “under their belt.”

The Real Prize of “Education are Good” 

        A significant difference in the work life income exists between professionally certified individuals and those with a bachelors or masters degree.  The lifetime income gap for those careers which lead to employment as a doctor, dentist, lawyer, financial analyst or others with professional academic certification are more than 70% greater than their bachelor degree counterparts, and approximately 50% greater than compensation for the average master’s graduates.

        In the business world, for most employers, the “piece de resistance” is having an individual with both an MBA and also a certification in his or her specific area of expertise.  For example, a prospective employee holding an MBA is looked upon as a “prize” hire.  If that employee has also attained a CFA (Chartered Financial Analyst) then that is considered the “piece de resistance” for a financial institution’s trust and investment department, or others requiring that individual’s expertise.  This combination functions as the equivalent of the professional degree in business.  It has been my experience in talking with employers that although certification with a bachelor degree is a “nice” touch; certification with MBA is the proverbial “top of the mountain.”  With an accredited MBA, a certified individual has shown that they have attained academic knowledge and professional competence in both the academic and professional arenas.

More Time than Money of “Education are Good” 

        The last stop on the educational train is the Doctoral Degree.  (Some may consider post-doctoral the last train stop: but one generally has to walk to the post-doctoral from the last stop.)  Most AACSB accredited doctoral degrees in business (PhDs or DBAs) require a student to go to school full time (part time students are generally not allowed), and work as a research assistant or teaching assistant while completing a doctoral education.  The work as a research or teaching assistant, although very mentally stimulating and personally rewarding, for the most part, lacks commensurate short-term rewards.  The financial rewards are generally only available after the doctoral degree is completed.  Most doctoral work from start to finish in business will take a minimum of five full years (including summers), or longer.  AACSB statistics show it takes approximately 6.1 years on average after completing a master’s degree to fully complete a doctoral degree.  AACSB provides a significant amount of data on both the time and financial commitment to complete a doctorate, as well as data on the supply and demand for business doctorates in most academic areas.

        Individuals with business doctorates generally desire to teach at a college level, and a business doctorate is considered part of the employer requirement by most universities.  There have been indications in recent years that some individuals with business doctorate degrees, in areas of high demand, have gone to work for public or private firms, spurning the educational market.  However, entry into this job market is highly dependent on the individual’s specialization and the economy’s needed for that area of expertise.  In the early 2000’s, when Wall Street was booming, it was reported that investment firms hired over 50% of the graduating finance doctorates.  Of course, when the down shift in the economy occurred in 2007 -2008, the private market job offers dried up and most of the graduating doctorates, once again, pursued a career in education.  As the economy began to improve the trend reversed.  What will happen in the future is anyone’s guess, caveat emptor.