© 2007 Arizona State University The Value of a College Education Why Finish Your Degree? Arthur...

© 2007 Arizona State University

The Value of a College Education

Why Finish Your Degree?

www.asu.edu/asu101

Arthur Blakemore, Ph.D.Chair, Department of EconomicsVice Provost

Last updated 07-16-07


There are many reasons to remain in college and get your college degree. Many of the reasons pertain to personal satisfaction. Other reasons are economic and more easily measured. Some of these measurable reasons for getting your degree follow.


Individual earnings are strongly related to

educational attainment. People who have

completed high school earn more than those

who have not; people with a bachelor’s degree

earn more than those with only a high school

diploma; and those with a graduate education

earn more than those with only an

undergraduate education. Consider the

following:


Value of a College Education

• Average annual earnings of individuals with a

bachelor’s degree are more than 75 percent

higher than the earnings of high school

graduates.

• These additional earnings sum to over

$1million over a lifetime.


• The differential in earnings based on

educational attainment has increased over time.

• For example, for full-time male workers

between the ages of 35 and 44, the earnings

premium associated with having a bachelor’s

degree versus a high school diploma has risen

from 38 percent in 1980-84 to 94 percent in

2000-03.



• If the value of a college education is expressed

on the same basis as the return on a financial

investment, the net return is on the order of 12

percent per year, over and above inflation.

• This compares very favorably with annual

returns on stocks that historically have

averaged just 7 percent.



In time periods of rapid technological progress, as we

are experiencing now, this earnings premium is likely

to grow as workers who have obtained critical thinking

skills adapt to innovations far better than those without

such skills. College provides the academic platform

for critical thinking and continuous learning, attributes

required in the modern workplace. As such, a college

degree also offers far more in terms of job security.


Education and Careers• According to Census data in 2006, college

graduates between the ages of 25-64 are less likely to be unemployed relative to high school graduates.

• College graduates are ten percentage points more likely to remain in employment.

• The average university graduate encounters much better career progression opportunities. Consider:


Education and Careers

Salaries average about $40,000 for a college

graduate at age 25 and tend to grow steadily

to about $65,000 by age 55.

A high school graduate can expect to earn

$28,000 by age 25, but earns on average only

$35,000 by age 55, if still employed.


With life expectancy growing so rapidly,

imagine that a typical young person entering

college today will work possibly 50 years! Job

satisfaction is going to be a very important

consideration for a time period approximately

three times greater than your current age.

Education and Job Satisfaction


Education and Job Satisfaction

• Jobs that require a college degree score far higher in terms of satisfaction.

• Some jobs are satisfying because they provide an important service to other people.

• Some because they are interesting and stimulating

• Some because they pay more.

• Some because they do all of those things.

They all have in common the requirement of a college degree!


Lifetime Value

Careers that require a college degree are far more

likely to have fringe benefits such as health

insurance, pension plans and paid vacations. Adding

salary, fringe benefits, greater retirement income and

greater job security, it is easy to imagine a college degree

worth several million dollars over the lifetime of the

average individual.

Now consider the following lifetime values:


• A standard health plan costs more than a $1000 a month for a family of 4. Someone with an employer provided plan usually pays a small fraction of this, saving as much as $10,000 per year.

• Someone with the normal salary progression, discussed above, contributing 5% of their income a year into a pension plan with an employer match will accumulate $849,000 by age 62 at the average growth rate for stocks.

• Someone on the non-degree salary progression who contributes 5% of their income without an employer match will accumulate $171,000 by age 62.

Lifetime Value


Lifetime Value

• Attending classes diligently and alertly is a key to college success, no matter how boring your professor maybe.

• You should spend 15 hours per week in a classroom for 30 weeks for 4 years at ASU, leading to a degree.

• This is $1,111 of lifetime value per hour spent in the classroom.


Lifetime Value

• Studying an average of three hours per

credit hour per week instead of one hour is

quite often the difference between passing

and failing.

• The extra hours studying can be worth

$555 prorated per extra hour.


The College Experience

• College is more than just a learning experience. It is a growing-up experience.

• It is a social experience that has value.

• It also is an experience in self-discipline, balancing things that bring immediate enjoyment against things that bring life-time satisfaction and income security.

• You are here to gain a very valuable all-around experience.



• Before hitting the snooze button and skipping

class, consider the value of that class to you.

• Before deciding to replace three hours of

studying with three hours of partying, consider

the value of those study hours to you. Do your

socializing after you complete your studying.



Before agreeing to work an extra 10 hours per

week for extra spending money and

replacing 10 hours of studying, compare the

hourly pay of the job with the lifetime value of

studying.


Why Finish Your Degree?

© 2007 Arizona State University The Value of a College Education Why Finish Your Degree? Arthur...

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