Financial Benefits of a College Education Are Smaller Than You'd Think
Unemployment may be beginning to fall, but millions of people are still having an hard time finding work. But there are parts of the U.S. economy where jobs are going begging, and it turns out that half of the top 10 occupations facing labor shortages don't require a college degree, according to the ManpowerGroup's (MAN) 2011 Talent Shortage Survey, released Thursday. For the survey, Manpower conducted telephone interviews with more than 1,300 businesses in the U.S.
For the second year in a row, skilled trades jobs such as plumbers, mechanics and chefs top the list of careers for which employees are in short supply. Indeed, there have been worker shortages in these areas not just for the past two years, but for virtually every year of the past decade.
"[A trade is] a family-sustaining occupation," says Melanie Holmes, vice president of World of Work Solutions for ManpowerGroup. "It requires some post-secondary education like a technical college, as opposed to a university."
Other jobs with a high demand for workers that don't require a college degree include drivers, accounting and finance staff, secretaries and machinists, says Holmes, referring to ManpowerGroup's top 10 survey for the U.S.
- Skilled Trades Workers - post-secondary education like a technical college usually required, but not a bachelor's degree
- Sales Representatives - post-secondary education optional
- Engineers - post-secondary degree usually required
- Drivers - post-secondary education not required for taxicab, limousine, long- and short-haul truck drivers, though some training may be.
- Accounting and finance staff - education requirements vary, ranging from junior accounting clerks, who don't need a college degree, to chief financial officers, who do.
- IT staff - post-secondary degree usually required
- Corporate managers and executives - post-secondary degree usually required
- Teachers, post-secondary education required
- Secretaries and personal assistants - post-secondary degree not required
- Machinists and machine operators - technical college training usually required
The Real Value of a College Degree
A Pew Research Center survey released last week also adds more fuel to the debate whether a college education is worth the dough spent to receive it.
One question that is particularly important to parents who are shelling out the funds to pay for college is whether, in the end, their child will be better off financially for it. Envision the diploma as a receipt for the thousands of dollars spent on your child's college education.
Here are some figures to chew on. A typical college graduate earns roughly $650,000 more than a typical high school graduate over the course of a 40-year career, according to the Pew Research Center study. But that figure drops to a net payoff of $550,000 four decades later, after accounting for out-of-pocket costs for college tuition and fees, and subtracting foregone earnings during the time in college cost opportunity to earn approximately $94,000 in income during the time while in college, versus the average annual income of $23,000 for a high school graduate during this same time period, the net benefit of going to college comes out to $550,000 four decades later, the report noted.
The dirt-cheap out-of-pocket college costs figure play a big role in the net payoff figure. According to the Pew Research folks, this excludes the cost of room and board, given a youth would have to pay these costs whether going to college, or living on their own and working. Pew Research pulled these figures for out-of-pocket college costs from The College Board's Trends In College Pricing 2010 report, These out-of-pocket cost figures apply to full-time undergraduate students attending public universities and colleges and takes into account estimated average grant aid and federal tax benefits.
Grants and financial aid can be a significant contributor to the mix, but of course that depends on a family's income level. According to the College Board's estimated figures for the current school year, full-time students attending:
- A private nonprofit four-year institution may be eligible to receive an estimated average of about $16,000 in grant aid from all sources and federal tax benefits over the course of their four years.
- A public four-year college or university may be eligible to receive an estimated average of about $6,100 in grant aid from all sources and federal tax benefits over the course of their four years.
- A public two-year college may be eligible to receive an estimated average of about $3,400 in grant aid from all sources and federal tax benefits over a two-year period.
The zero out-of-pocket costs for an associate's degree applies the College Board's assumption of a negative $1,340 in tuition and fees after applying a portion of the grants, financial aid and federal tax benefits that may be available.
In comparison to an associate degree, a bachelor's degree in the field of education would likely yield a substantially smaller net payoff, or even a loss compared to a high school graduate.
But if you were to take the $180,000 in net income earnings gained and include the $94,000 in lost income while attending college, that would leave a graduate with a bachelor's in education ahead of a high school graduate by only $86,000 over the course of their 40-year career before factoring in the cost of college tuition, fees and some books.
But Nathan Murata, University of Hawaii interim associate dean for the college of education, had this to say: "I look at it as the glass is half full. There are certain things that require time, resources and energy and when a person commits to something they value, you can't always put a price on it."
One price Murata can't put on a bachelor's degree is the one Pew does, at least not at UofH. He says he's never seen any of his students obtain a bachelor's degree for a mere $6,000 over four years of tuition and fees.
"That comes out to $1,500 a year, and I don't know of any students who are attending here for only that much in tuition and fees," he says, noting the college does provide some financial assistance with scholarships of $1,000 to $2,000 a year to offset the annual cost of roughly $15,000 a year.
The Earning Power of Post-Grad Education
Meanwhile, when weighing a master's degree in liberal arts against a bachelor's degree in the same field, the net payoff is not that substantial, as well. The difference comes out to roughly the cost of a new car:
But professional degrees, such as a doctorate or law degree, can yield a sizable jump in net payoff over the course of a 40-year career compared with holding a bachelor's degree in social science or law -- to the tune of over $1 million.
The out-of-pocket cost for a professional degree was derived from the National Center for Education Statistics' Condition of Education 2010 report, says Richard Fry, senior research associate with the Pew Research Center. He noted the $75,000 in out-of-pocket cost is the average for a full-time student attending three years of law school, after accounting for about $4,500 in grants and $900 in assistantship and other aid.
When it comes to various fields of study, a bachelor's degree in engineering yields a far different outcome than one in liberal arts, or education.
"Generally, it's understood that a typical engineering degree does much better than one for teaching," Fry says. He noted the less lucrative fields of study were selected for the report, but that even so, a liberal arts major still comes out ahead of a high school graduate.
Here's a list of a handful of fields and how they fare in terms of delivering a net payoff down the road:
While a bachelor's degree in liberal arts or education did not carry a net payoff greater than one would receive with a two-year associate degree, fields such as computer science, engineering and business carried a sizable lifetime return on investment.