Despite reports of historically high student loan debt and fresh graduates struggling to find work, a four-year degree has never been more valuable than it is today. This especially true when it comes to employment stability. The unemployment rate for people with a high school diploma, or some college but no degree, stands at six percent, while the unemployment rate for people with abachelor’s or master’s degree is3.5 percentand 2.8 percent, respectively. The rate is even lower for professional and doctoral degree holders. These groups have a 1.9 percent and 2.1 percent unemployment rate, respectively.
While stability is cited as a major benefit of earning a college degree, earning potential is an even bigger draw. In fact, according to the Federal Reserve Bank of San Francisco (FRBSF), college graduates may earn over $800,000 more than the average high school graduate will by retirement age. To break it down, the Bureau of Labor Statistics (BLS) reports that median weekly earnings for individuals with a bachelor’s degree were $1,101 in 2014. For those with a high school diploma, or some college but no degree, earnings were $668 and $741 per week, respectively. And for advanced degree holders? Weekly median earnings were $1,326, $1,639, and $1,591 for masters, professional, and doctoral degree holders, respectively.
Data from other sources even suggests the pay gap between college graduates and everyone else reached a record high last year. According to a New York Times report on findings from the Economic Policy Institute (EPI) in Washington, Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree. That’s up from 89 percent five years earlier, 85 percent a decade earlier, and 64 percent in the early 1980s.
While people in just about every industry will likely reap the benefits of holding an advanced degree, MBAs enjoy even greater stability and higher salaries than professional degree holders do. According to a 2015 CNN Money report, 43 percent of MBA graduates surveyed by Training the Street reported a base salary of at least $125,000. Another 36 percent reported making between $100,000 and $125,000. Further, the Bureau of Labor Statistics (BLS) reports that top executives, who typically hold a multiple degrees—including an MBA, are among the highest paid workers in the U.S. Median annual wages are $102,750 per year for top execs and $173,320 for chief executives. General and operations managers average $97,270 per year, and those working in finance average $115,320 per year.
Rewind to the 1980s when a Wall Street Journal article reported that recruiting activity for MBAs was higher than ever. These degree-holders were in such high demand that many students were forced to turn down multiple offers and major corporations hired first and asked questions later. In fact, the Exxon Corporation attempted to hire the entire graduating class of 1981 at the University of Chicago. At the time, the national average wage index was $13,773, yet salary offers for graduating MBAs were reaching $40,000 to $50,000, with bonuses as high as an additional $20,000. By 1999 (the earliest figures available for management and executive occupations), the average chief executive was earning more than $100,000 per year, and general and operations managers averaged $65,910. Those working in finance averaged $69,100.
Of course the cost of living, and not to mention tuition prices, have increased tremendously over the past several decades, especially at the world’s top schools for MBAs. So while it appears that, in terms of salary, the value of an MBA was as significant yesterday as it is today, as mentioned, the debt that comes with earning an MBA today is significantly more. According to a Bloomberg Businessweek report, education is one of the biggest contributors to spending increases between 1980 and today. The National Center for Education Statistics (NCES) reports that for the 2012-2013 academic year, annual dollar prices for undergraduate tuition, room, and board were estimated to be $15,022 at public institutions, $39,173 at private nonprofit institutions, and $23,158 at private for-profit institutions. For the 1982-1983 academic year, costs were $6,941 at public institutions, and $16,311 at private nonprofit and for-profit institutions.
However, returns on college education have also increased—although slower than previous decades. According to the Graduate Management Admission Council (GMAC), the percentage of full-time MBA alumni who reported that their investment in their graduate management education was recouped sooner than they had expected is 41 percent for classes of the 1980s, 36 percent for classes of the 1990s, 31 percent for classes of the 2000s, and 19 percent for classes of 2010-2013.
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