College: The Payoff Shrinks

I post quite frequently about the value of an education (that if you get more education, you generally make more money over your lifetime). Here's an article from Business Week that says the value of a college degree is actually going down. The summary:

The Americans who should be prospering in a knowledge economy -- the college-educated -- are instead taking it on the chin. Real earnings for workers with only a bachelor's degree have fallen for four straight years, for the first time since the 1970s. And the decline -- about 5% since 2000 -- shows no signs of abating.

Since 2000, however, the college wage premium has shrunk, because the pay of high school graduates has eroded less than that of college grads. Why? Outsourcing of skilled jobs to China and India is part of the explanation, as millions of their college-educated workers join the global economy. Wages may also be held down by oversupply in the U.S., since the number of college-trained workers here has grown by 32% over the past 10 years, compared with only an 8% rise for all other education levels. Technology may be getting simpler and easier, requiring less education to use. Or the drop in grads' earnings may be a temporary hangover from the tech bust.

Interesting. But just to clarify:

1. It's still worth it to get a college degree (you still earn more), it's just that it's less worth it than it has been in the past.

2. This is for workers "with only a bachelor's degree." I assume that those with master's degrees and higher are doing better or it would be included here.

My thought is to look at education as an investment. You spend time and money to get it and you want to earn back your investment plus some. Generally, this is a no brainer -- you certainly earn it back. Yes, there are exceptions, but on average, this is certainly the case.

Comments

[YoungMiser]

Sure while the age gap may be closing, the problem is that someone without a college degree going against someone with a college degree with similar experience is going to get the job over and over. Usually someone without a degree is going to have a really hard time finding a job, especially when that person is in the entry level category. People with lots of experience can get away with it a little bit more, but that will soon be a thing of the past.

[Sagetips]

The report focuses on the outputs (earning levels) of a college education. Unfortunately, the input side of the equation (college costs)is also bleak with tuition rates annually rising 2x or more the general rate of inflation. Not pleasant.

Still, aside from the earnings aspect, there are other lifelong benefits of a college education that easily justify the cost (IMHO).