What You Need to Know About the Value of Education

We know a lot about the cost of an education. It costs too much. Here are some other things we know about education. Growing student debt is a student problem that is rapidly becoming a threat to growth of our economy. These issues are getting a lot of attention these days. In contrast, there is little good information about the value of an education today. This post is devoted to the value indicators.  Buzz Today Source: Pew Research Center “The Growing Economic Clout of the College Educated.”College-educated households are the only households whose incomes have grown on a per household basis from 1991 to 2012. There are a number of factors at play in boosting the household incomes of the college educated relative to less-educated households. A primary factor is the better fortunes of the college educated in the labor market. The Georgetown Center on Education and the Workforce finds college graduates earn nearly twice as much as workers with just a high school diploma.

Value Proposition number 1: Education is the key to upward social mobility. Research shows that it is possible to move up in society – with an education. Source:  Federal Reserve Board of San Francisco: A college education can counter the effects of birthright. Only 5% of children born into the bottom quintile (lowest 20%) who don’t graduate from college end up in the top quintile (top 20%). By contrast, 30% of bottom-quintile children who graduate rise to the top quintile (from the bottom 20% to the top 20%). This is clear evidence that a college education is key to the American Dream of having a better life than one’s parents.

Value Proposition number 2: College favorably impacts skills that are important to compete in our modern global economy.  Source: “How College Affects Students: A Third Decade of Research”. All of the following critical skills were found to have statistically significant improvement as a result of a college education. The list includes:

Verbal skills    Quantitative skills     Speaking skills      Written communications     Critical thinking skills      Conceptual complexity.

A survey of employers shows that employers are looking for these very skills.  A report from the American Association of Colleges and Universities  provides data from a January, 2014 survey of 318 corporate executives showed that 93% of those responding agreed that “a demonstrated capacity to think critically, communicate clearly, and solve complex problems” is more important than the skills of the candidate’s undergraduate major.  And 75% of those surveyed said they want more emphasis on critical thinking, problem-solving, written and oral communications and applied knowledge.  And 95% said they want new hires to demonstrate ethical judgement, integrity and the capacity to continue to learn.

Value proposition number 3: College educated households are the only one’s with growing household incomes. All other levels of education have actually declined.

Household Income (2012 dollars)

Education                                  1991              2012             Percent change

Less than high school             $33,959       $32,631                 -4%

High School                                 54,707         52,199                  -5%

Some College, no degree           66,038        63,008                 -5%

Associate’s                                    72,407        68,902                  -5%

Bachelor’s                                     92,289       100,637                +9%

Master’s                                        104,193      114,897               +10%

Professional                                 150,869       180,671               +20%

Doctorate                                      131,365       150,087               +14%

Source:  Pew Trust Research

When you look at the difference between the income for Some College, no degree and the income of a Bachelor’s degree you can see why it is so very important for those with some credits but no degree to complete their college education and graduate.  The difference in income is worth, on average, over $37,000 each year. There are about 38 million Americans in this position.  The irony is that with wise choices, it could cost as little as another $25,000 to complete that degree. Doing that would be of immense value when the value created every year is much more than the total investment.

The cost of an education is pretty clear. The value of an education is less clear. And least clear of all is how to get the value of an education without incurring the high costs that are so widely reported these days. For the latter, see Your Future is Calling for exercises and valuable data.

Credentials Matter

Degrees are important. They matter to both employers and students. Markets confirm that it is not just about what you learn. It is also about what your learning communicates to others. In many cases, having known credentials are required to even be considered.

BUZZ Today Source: Georgia Tech Announces Massive Online Master’s Degree in Computer Science While courses related to OMS CS (Online Masters Degree in Computer Science) will be available free of charge on the Udacity site, only those granted admission to Georgia Tech will receive credit. Degree-seeking students will pay tuition based either on individual course or the entire degree program. Georgia Tcch and Udacity also will develop a separate credential for those who successfully complete courses but do not qualify for full graduate standing. Source: Harvard University faculty member blog on Computer Science CS50x MOOC: CS50x’s “completion rate” is (defined as submission of all work with scores of at least 60%) was .9% out of 150,349 who registered. By contrast, 702 out of 706 students (99.6%) “completed” CS50 on campus this past fall (2012).

The experiments with MOOCs are revealing some important information about how students are viewing the MOOC value proposition. Let’s look at the Georgia Tech Masters degree in computer science. With help from AT&T this innovative and highly cost competitive master’s degree will cost $7,000 to the student. This cost for a master’s degree from a highly prestigious university is rightfully being hailed as a real break through in the cost of an accredited degree. The development has been praised as true innovation. It is.

But what is interesting for the discussion here, is how the students admitted to the degree granting program view the MOOC. As with CS50 at Harvard, the MOOC will deliver the exact same content to both admitted university students and anyone who desires to take the program content. In both the Harvard and Georgia Tech situations, students enrolled in the credit granting activity (CS50 in the Harvard University case and OMS CS admitted students in the Georgia Tech case) have the option to take the same course as a free MOOC. They could have the same content without paying any tuition whatsoever.

So if it were just about the content of the courses, why wouldn’t every student qualified to be admitted and paying tuition simply take the free MOOC instead? The only plausible answer, is that the students with the choice value the credential associated with the tuition. In the case of the Georgia Tech master’s degree, the value of the credential is at least $7,000. This is a bargain compared to traditional master’s programs, but relatively expensive when compared to free. The same thing can be said about CS50x at Harvard where the cost for the CS50 degree related course on campus is at least several thousand dollars. Credentials matter.

A couple of conclusions are immediately evident. The first is that to be a true substitute for the existing traditional higher education model MOOCs will have to address the credentialing issue. The specifics in BUZZ Today tells us that simply issuing a separate certificate is not sufficient to give the student the value gotten in an accredited degree program. To be truly viable alternatives, it is likely that the MOOC model will have to incorporate some of the attributes of accredited degrees. Some of these attributes will no doubt include selectivity and admission qualifications, faculty support, infrastructure support including mentoring, coaching and advising. These, along with investment in content development, will require a revenue model for investment funding. As a result, it is highly likely that at least a portion of the current MOOC phenomenon will become MOC (Massive Online Courses) with non-zero cost to fund the services that are part of a market valued credential. Another implication is that valued higher education requires more than prestigious course content.

The other dimension of the Credentials Matter conversation is the role that employers play. Job position postings overwhelmingly specify accredited degree credential requirements. The qualifications segment of those job postings do not typically say: “The following MOOCs required: _____, _______,______” They most often state:

“Bachelor’s degree required with 3-5 years experience in the field.” Credentials matter to employers too.