Yes . . . but WHAT you study matters MORE. Choice of College major affects salaries – big time! Student loans are in the headlines. Obama’s gone after student votes by revamping student loan schemes. ‘Skip-college’ advocates are reviving debates about whether a bachelor’s degree is still worth the money. A majority of Americans (57%) say college is not a good value. (Pew Research Center)
Is college a good investment? YES! The evidence clearly shows a college degree improves your chances in the labor market, in both good times and bad. A new Census Bureau study answers that question with a resounding yes and found that education levels had more effect on earnings over the past 40 years than any other factor such as race or gender. The estimated difference on annual earnings between a college grad vs. one without a high school diploma was $72,000 a year. Brookings Institution puts the average value of a college degree at $570,000 on an average $102,000 investment. Pew Research Center says 4-year college grads earn $20,000 more a year because of their degree. Wharton economist, Peter Cappelli, cites a vivid example of how college matters in the growing debate on income disparity: If you sort U.S. workers into 4 groups based on education, only one has seen its inflation-adjusted median wage rise since 1979. The gains went to people with college degrees, while all other groups have experienced declines in real wages. He concludes that, while college isn't an automatic ticket to prosperity, this trend reflects how sophisticated skills and judgment still command a wage premium.
Some groups benefit from college more than others. English-speaking non-Hispanic white males & Asian females fare the best. Asian and non-Hispanic white males and Asian females earn bigger salaries from college degrees, according to the Census Bureau. White men with degrees earn more than double Hispanic females with the same degree – averaging $2.4 million more. Language spoken at home also had an effect on earnings: those who spoke a language at home other than English saw a decrease in annual earnings. Even those who speak English ‘very well’ saw a decrease in annual earnings compared with English-only speakers.
It’s a tough job market. We have a massive push to drive all high school students, stay-at-home moms, retired workers, etc. to pursue a college degree. However, many would be better off financially in a vocational training program, rather than a liberal arts college. On-line degrees also tend to further ‘water down’ the value of some degrees. Census Bureau figures show 70.1% percent of high school grads in 2009 enrolled in college; however, 75% of those in the lower 40% of their class probably won't graduate if historical trends hold. Over 40% of students in a bachelor’s program don’t have a degree after 6 years, according to Richard Vedder, author of “Going Broke by Degree”.
And the cost – even for 1 year or less – is growing as financial aid is shrinking. The return-on-investment in a college degree, especially one leveraged heavily by loans and debt, may just not be worth it for many. A smart option that’s increasingly popular is to take advantage of significantly lower costs at community colleges for the first 2 years, then transfer to a 4-year degree program.
Engineers, Accountants, Business, Economics majors do the best. According to Payscale.com, the safest of all degrees are in accounting and business: 46% of accounting majors have already been offered jobs; 44% of business majors have job offers. Economics majors aren’t doing badly, either, with starting salaries of about $50,000 and rising to a mid-career median of $101,000. Engineer majors of all kinds —chemical, computer, electrical, mechanical, industrial, mining, environmental—have also done well since the onset of the recession and have the highest median pay. Aerospace engineers do best with a starting salary of $60,000. Georgetown University found a degree in engineering is worth more than $1 million more in lifetime earnings while a degree in education can be worth $241,000 more. Other majors with the highest median pay include: pharmaceutical sciences, math and computer sciences.
Educators, Social Workers, Artists do the worst. The majors with the lowest median earnings were education, community organizations, social work, visual and performing arts, drama & theater arts, studio arts, human services, counseling and psychology, communication disorders sciences/services and health and medical preparatory programs. Areas with the highest unemployment include educational administration and supervision, social psychology and nuclear engineering.
My Bottom Line: A college degree is still a much better investment than almost any other alternative. It dramatically boosts the odds of finding a job and making more money. It can also be a helluva fun time!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.