Value of an Advanced Degree Later on in Life

As I've stated before, I'm a big believer in education -- and how it can dramatically improve your lifetime earnings potential (and thus your net worth.) I've also noted that an MBA has had a substantial impact on my personal earning ability. But those facts aside, what is the value of an MBA -- or any higher degree -- later in life?

I'll start with my opinion: The later in life you get an advanced degree, the less it's worth. And it's not worth less simply because there are less years for you to use it (in other words, if you get an MBA at 25 you have 40 years to capitalize on it versus only 20 years if you get it at 45), but the rate of decline in value of an advanced degree accelerates as you get older. And past a certain age, maybe 40 or 45, it's fairly worthless if you're simply looking at the economic benefit involved. The one exception to this is if you're totally shifting careers/fields. In that case, it's as if you're fresh out of college and need an extra boost. In this circumstance, an advanced degree is valuable at a much later age.

So why do I say the value of a degree decreases more rapidly as time goes on? Because with each year, your education becomes less important and your experience becomes more important. The gap widens every year until eventually your work experience totally overshadows your education.

Consider the following:

• An executive who has a 20-year track record of being a bumbling manager, never delivers good business results, and is hated by his employees and co-workers. Now he gets an MBA. Is he worth more to the company? Is he worth more to any company? Probably not much if any. No one wants to hire a "loser" no matter what his degree.

• An executive who has a 20-year track record of being an excellent manager, always overdelivers on his assigned business targets, and is loved and admired by his employees and co-workers (who he can motivate to do anything.) Now he gets an MBA. Is he worth any more to any company? Probably not. He was (or should have been) well-paid before the degree and after getting the degree he's really not any better at what a company would hire someone like him to do.

In almost every case I've seen an older worker (40+ -- BTW, I'm in this category myself, so I'm NOT calling people over 40 "old," I said they were "older") go back to get a degree, especially an MBA, and stay in the same company, his/her pay and job title has remained virtually identical to the pre-degree pay. There has been absolutely no benefit economically to the degree. In fact, there could be a loss economically if the person forfeited two years of work (and pay) to get the degree.

Now I understand that to some people there is simply a "value in learning" that is in and of itself worth getting an advanced degree. I'm not talking about that here -- I'm talking from a strictly economic/pay standpoint. It's not a good deal later in life.

Furthermore, I'm looking at this as it pertains to the business world primarily -- maybe it's different in other disciplines. For instance, getting a doctorate later in life may still be worth it if you're a college professor. Or perhaps if you're a scientist. Maybe you can think of a few more instances where this is the case.

So what do you think, am I on target or just full of it? Let me know in the comments below -- I'm interested in hearing your opinion.

Comments

[Lord]

You are on target. A newly minted degree at 40 isn't worth any more than a newly minted one at 25, and probably less as the company can't expect as many years out of it either. The most it can do is slow the rate of depreciation, but there is little evidence of it's power at that either. So much for the new 40.

[tinyhands]

As someone who got his MBA within the last year, at age 34...

It is possible to get an advanced degree (specifically an MBA) too early as well. Many of my classmates were straight from undergrad and had no real-world experience from which to draw. In my opinion, this lessened the value of THEIR particular degree.

Now although this opinion is mostly about the "value of learning" stuff you didn't want to discuss, I think it also colors my opinion of hiring someone like that as well. Between two 25 year old applicants, I personally would value a BA + 3 years relevant experience over an MBA with 0 experience. Your mileage may vary.

As for whether the degree impacted me monetarily, I'm an erroneous data point. I switched careers at the same time and took a modest paycut after being unemployed for 3 years.

[Lazy Man and Money]

I think the bumbling manager with an MBA stands a better chance of switching companies and using that MBA for a higher paying job. The new company may not realize that he's bumbling and go by the nice resume, the nice education, and maybe a bit of smooth talking.

In a lot of ways the MBA stands as a piece of paper vetting you. Someone without an MBA, even with glowing references, would probably not do as well in a job switch.

[FMF]

1. If someone's a bumbling manager, they usually aren't that smooth.

2. Are you speaking from experience or just giving an opinion? I've actually been in the situation and hired people where criteria was nearly the same. If an MBA was a tie breaker, it would hold some sway, but intangibles like company fit, personality, etc. would be just as important or more so.

[My Financial Journey]

@Lord -

You've definitely got a point about waiting a few years to get your MBA so you have some real world experience to apply your new found knowledge too. That being said I got my MBA right after my bachelors (was working full-time while getting it though) and while I may not have got the most out of my MBA because of lack of experience to apply to class work. And yes if you had the choice between a BA+3 years and and MBA with 0 experience (although in my case I got 2 years full-time experience while getting MBA) go with the BA. Now lets forward just 3 years. BA+6 years or MBA +3 I'm thinking the MBA is going to win just about every battle once he has 2 or 3 years experience.

I finished my MBA and did not see an immediate impact right away. But now just a little over 2 years later I'm making over $30,000 more a year than I was before and I don't see things topping out for a while. I'd say get the MBA as soon as possible.

[Lord]

I have thought it peculiar that companies go to such lengthy efforts to find just the right person as though they were hiring them for life, but cast them off so readily whenever there is a shortfall. Most will not be with a company more than 5-10 years so using lifetime criteria and spending a fortune in effort, money, and time is unwarranted. Yet it is done almost everyday and everywhere.