How to measure the value of an education
The debate over education vs. experience has been going on for quite a while, but perhaps never as fervently as it is right now. With millions of people struggling with skyrocketing tuition costs and a shortage of labor both skilled and unskilled alike, just how important is that little piece of paper with your name on it?
Like everything else in our society today, your politics play a central role in how you answer that question. A recent study by the Pew Research Center found that while 67% of Democrats have a positive view of American universities, only 33% of Republicans do. Of those Republicans who hold negative views of learning institutions 73% feel that students are not getting the skills they need to succeed in the workplace. Some liberals however are also beginning to question the importance of college degrees. Last week, on his weekly HBO show, "Real Time with Bill Maher," the noted progressive made headlines when he called higher learning a “grift” comparing it to Scientology with both groups shaking down individuals for a promise of upward mobility.
Putting ideology aside, however, what do the statistics say about degrees? Are they worth the cost you pay to get one? According to the most recent data from the Department of Education, the approximate average price of a four-year degree at a public university is just over $100,000 and just under $220,000 at a private university. And, according to the U.S. Bureau of Labor Statistics that results in an average starting salary that is roughly 10% to 30% higher than those without a college degree and they make $502 more in median weekly earnings. According to the same study those over the age of 25 without a college degree were also 40% more likely to be unemployed than those with one.
I think the data is clear that the likelihood of earning more increases as your education level does. However, there is certainly a trend by businesses away from requiring degrees as prerequisite for consideration particularly in the technology field. At a 2020 conference, Tesla CEO Elan Musk said colleges “are not for learning, but rather a place to have fun” he argued that anything you wish to learn about can be done online for free. Musk is not alone in this sentiment as some of the most well-known tech giants such as Bill Gates, Mark Zuckerberg and Steve Jobs all dropped out of college to start their own companies.
In 2019 at a Policy Advisory Board meeting of industrial leaders Apple CEO Tim Cook expanded on why he believes college degrees are becoming less important. He argued that too often there is a “mismatch” between the skills being taught in many schools and the skills needed by businesses today and in the future. At this meeting he acknowledged over half of Apple’s workforce no longer have college degrees.
But what if computers aren’t your thing? Is there a place for non-college graduates in the economy of today? The answer appears to depend on the field you wish to enter. For people simply seeking a high-paying job, there is a great shortage in skilled tradesmen and because of that, they are in very high demand. According to the Bureau of Labor and Statistics both welders and electricians are identified as two of the most difficult-to-fill job openings in the entire U.S. This has resulted in substantial increases in what these positions pay. In fact, the median wage for all tradesmen in the U.S. was $43,322. That’s about 10% higher than the median wage of $39,810 for all U.S .occupations over the same timeframe.
While these types of blue-collar careers do often require certain certifications, they are far less of an investment in both time and money to acquire. For jobs in these industries your of level experience is the primary determinant of what you are paid.
As someone with both a degree and a love for continued education, college was certainly the right decision for me. However, before plunking down a lot of money on schooling you should really examine what your goals are in life to make sure it is the wisest choice for you or someone you love.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations.)
Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.