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.