Does Education Pay Off?

In What’s the Value of Education?, we looked at education and its affect on unemployment and workforce participation.

Today, let’s examine the impact of education on employment and earnings. Does education really pay off?

According to the Bureau of Labor Statistics (BLS), those with the highest education levels have experienced the lowest unemployment rates during the recent recession.

Moreover, education has a substantial affect on earnings. Note that those with professional degrees (doctors, lawyers, etc.) earn more on average than those with doctoral or master’s degrees.

Does education pay off?

The chart shows that those with the least education suffered the highest rates of unemployment in 2010, while those with the most education enjoyed extremely low unemployment rates. Unemployment rates decline incrementally with each added level of education.

These figures, however, may be somewhat misleading. Many of those with PhDs* are employed in education, where they're covered by labor agreements and tenure arrangements that protect them from workforce reductions.

This is a luxury many workers, even other highly educated professionals, do not enjoy. So, in some respects, it's possible this group's reduced unemployment rate is as much a reflection of these extra protections as education level.

Not long ago a colleague remarked that educators and employment professionals use terms and refer to fine gradations in educational levels that aren't immediately meaningful to the rest of us.

To help the chart above make more sense on a practical level, I've streamlined the BLS degree descriptions below:
  • Doctoral degree: Three years of full-time academic study beyond a bachelor’s degree (specialists, educators, administrators)
  • Professional degree: Three years or more of full-time professional academic study beyond a bachelor’s degree (lawyer, physician, surgeon, dentist, etc.)
  • Master’s degree: One or two years of full-time study beyond a bachelor’s degree (counselor, education administrator, other diverse specialties)
  • Bachelor’s degree: Typically four years of full-time academic study beyond high school (any conceivable career field)
  • Associate’s degree: Two years of full-time academic study beyond high school (automotive mechanic, paralegal, dental hygienist)
  • Some college or professional training: Select training/education beyond high school that may lead to specialized certification (nursing aide, court reporter, semiconductor processor, actor)
  • High school degree: Completion of a basic high school or General Education Development (GED) degree (plant operators, aides, security guards)

Information is power. Whether you're a parent, student or employer, it's important to understand both the costs and benefits of education as a first step in determining the ROI on any education investment.

Earnings and earning potential are the most common ROI indicators. However, as we've seen, each level of formal education increases opportunity and provides a greater level of protection in a recession economy.

Factor these elements into your ROI assessment, as you determine whether additional education has value to you.

* Traditionally, the doctoral degree is shown as Ph.D. In practical venues such as this, I rarely use periods in abbreviations and acronyms, hence PhD.

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