How Much is a Bachelor’s Degree Worth?

How Much is a Bachelor’s Degree Worth?

A recent article in the New York Times argues heavily that the value of a college degree is increasing, with college-educated workers seeing real increases in wages in comparison to those who are less-educated. Plus, it’s common knowledge that college grads make more money on average than those who don’t make it there. I know my mom (Hi Mom!) would always point out the difference in salaries to me whenever census data was published and I didn’t want to do my homework. However, that does not cover the whole issue. Sure, college grads make more than those who don’t get a tertiary education, but that may have little to do with the degree. A New York Times article from last fall states the problem succinctly:

Sure, Harvard graduates make more money than graduates of just about any other college. And most community-college students will end up making far less than graduates of flagship state universities. But of course these students didn't enter college with the same preparation and skills.

Essentially, the higher salaries that college grads pull down may just come about as a result of those grads naturally being more highly-skilled and better-motivated workers. After all, the skills that make one successful in college–a solid work ethic, knowing how to work with others, time management, etc.–understandably also make one successful in the workplace. So really, the numbers you would need to compare are the salary of the average college grad, and the salary of the average college grad had they not graduated college. If your head hurts right now, that’s because the second number is by definition impossible to find. This problem is called “selection bias.”

As you can see, the question can get incredibly complicated, frustratingly so if you’re debating whether to Kanye West your college career.

An oft-quoted statistic is that a bachelor’s degree will earn you a million dollars more over your lifetime. This statistic does not take into account the time-value of money (a dollar today is worth more than a dollar next year, since you can invest your dollar today). Taking that into account, US News & World Report found that one only made an additional $300,000 in today’s money. However, a study by the National Association of State Universities and Land Grant Colleges that actually controls for the fact that college grads and non-college grads are different kinds of people, found that over a lifetime, the difference in earnings is only $121,539. Seems like a small number, huh? But if you’re not opening your own business, you probably need a bachelor’s degree. After all, people with less education face substantially higher unemployment. This again suffers from selection bias though.

Many job’s require bachelor’s degrees before they even offer you an interview. This may be because by earning a bachelor’s degree, you show the companies that you are one of those people who works hard enough to earn one. And so the snake of statistics continues eating its own tail. Once the census data from this year is compiled, the government will release a figure showing how much more college graduates make more than those with only a high school diploma. I hope you know now to take that figure with several dozen grains of salt.