Wednesday, June 8, 2011

What's a college degree actually worth?

A recent study linking college majors to lifetime career earnings has rekindled the long-standing debate over the economic value of higher education.
FFORTUNE -- Any student or recent graduate knows the awkward college major conversation all to well :
"What are you studying? Oh, interesting. What are you planning to do with that?" Translation: Will you actually be able to pay your bills with a liberal arts degree?
A recently released study linking college majors to lifetime career earnings has rekindled the long-standing debate over the economic value of higher education.
The roots of this debate run deep. John Adams, the second U.S. president, even offered his view in the late 18th century. His generation and his sons' generation studied practical subjects "in order to give their children a right to study painting, poetry, musick, architecture, statuary, tapestry and porcelaine," he wrote his wife, Abigail, in a 1780 letter.
College remained, for decades, a privileged aerie, populated largely by scions of wealthy families. Following World War II and the passage of the G.I. bill, a four-year college education became accessible to the middle classes, allowing a more diverse group to follow Adams' vision and study painting, poetry and other areas not offering certain financial futures.
Even so, generations still debate the practical worth of university degrees -- in everything from drama to French -- at many a kitchen table. Rising education costs, weighty student debt, and the paucity of jobs have given the discussion even more urgency.
Some like Apple's (AAPL) Steve Jobs endorse studying humanities -- noting recently that "technology alone is not enough -- it's technology married with liberal arts, married with the humanities, that yields us the result that makes our heart sing."
College dropout Bill Gates has a different perspective. He urges students to pursue a practical education, advising state governors at the National Governors Association's meeting last February to focus on "categories [of courses] that help fill jobs and drive the state economy in the future.
PayPal founder Peter Thiel goes even further. He counsels students to skip college altogether and start a business instead, and he is even putting $2 million behind his idea.

College degrees, say Thiel (who has a bachelor's and a law degree from Stanford), are the wrong indicator of success because smart kids have the drive and ambition to succeed without taking time for college and racking up costly student loans.
Such differing views come down to whether a college degree is seen as a commodity to be purchased or an experience that opens up new possibilities.
"It's both," says Anthony P. Carnevale, director of the Georgetown University Center on Education and Workforce, and an author of a new study that examines the linkage between college undergraduate majors and lifetime career earnings.

Yes, it's still worth going
Although the study concludes that there are wide variations in the career payoffs from undergraduate majors, it concludes that a college degree is worth the time and money spent.
"But the days when you could go to college, get a bachelor's degree and have access to a wide variety of jobs, those days are gone because there are more qualifications required to get a job," warns Carnevale. "It takes employers years to train people, but no one wants to commit to a 30-year career any more."
To pinpoint the return on educational dollars spent, the Georgetown study used U.S. Census data gathered in the 2009 American Community Survey to glean information for the lifetime earnings for 171 undergraduate college majors. The study found that the total salary return on some majors is far better than others -- with various engineering degrees, from petroleum to mechanical, delivering earnings as much as 300% more than less technical majors.
Clustered at the other end for overall earnings were majors like social work, drama, and early childhood education. But, in an encouraging sign for the less technical-minded, liberal arts and humanities majors were in the middle of the pack in terms of earnings and employment, with median incomes of $47,000.
The study did not factor in health, retirement and other benefits but based its conclusions on data from some three million Americans responding to the federal survey.

Humanities majors: There's hope
A separate study, from compensation data provider PayScale, suggests that all is not grim for humanities majors when it comes to earnings potential. Its latest "college salary" report found that scientists and engineers fare best, but noted that "there is still plenty of money to be made with a liberal arts degree."
PayScale used nationwide salary survey data of people with undergraduate degrees and calculated starting salaries and median salaries for mid-career workers, defined as people who had 15 years experience in a field. Engineering -- aerospace, chemical computer, electrical -- took the top mid-career salary slots, with earnings between $109,000 and $102,000. Majors like elementary education ($42,400) and social work ($41,600) yielded the lowest median salaries, but other majors like philosophy had a median salary of $76,700 and art history delivered a median salary of $62,400.
To be sure, many liberal arts and humanities majors are not relying solely on their four-year degrees for their career earnings, the Georgetown study noted. Some 41% of liberal arts and humanities majors go on to earn graduate degrees, which provides graduates with an 50% return on their investment, on average, according to the study.
These majors "generally fare well in the workforce, ending up in professional, white-collar and education occupations," Carnevale concludes. He says that job opportunities began to shift significantly in favor of degreed-workers after the economy restructured in the wake of the recession in the early 1980s.
While graduate degrees deliver higher earnings, the increase also depends heavily on the subject area a student pursues, according to the report. Health-care and biology-related areas deliver the highest earnings bump. But advanced degrees in studio arts or petroleum engineering yielded among the lowest earnings increases. Georgetown plans to release another study detailing graduate degree earnings.
Carnevale warns that students should examine options closely before deciding their choice of major. For example, he said an undergraduate business major with a concentration in hospitality would yield a far lower salary than other types of business majors. Even so, an undergraduate business degree in finance, accounting or economics would out-earn an economics degree earned in a university's social sciences department, he says.
Georgetown's findings are underscored by data for starting salaries for this year's college graduates. The National Association of Colleges and Employers (NACE) recently reported that seven out of the 10 top-paying majors are in engineering, which includes chemical, mechanical and electrical engineering. Computer science was the only non-engineering major in the top five.
Graduates with these majors were offered an average starting salary of $60,000, according to the 2011 Spring Salary Survey, a study of 70 different majors at colleges and universities across the country that NACE conducts every three months.

Gaps that go beyond college majors
In at least one respect, little has changed for the high-paying technical college majors -- white men predominate. The Georgetown study found that even though there are significant numbers of women in such technical majors as mathematics -- where 44% of undergrads are female -- this did not mean a higher-paying career.
"Women earn, on average, $20,000 less than their equally educated male counterparts," Carnevale says.
African-Americans are in a similar situation, earning an average of $22,000 less than their white counterparts who majored in the same subject, and $12,000 less than Asian counterparts in a well-paid major like electrical engineering.
"We never expected to find this," he says. "These differences came as a real surprise. We thought it had changed.

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