With the difficulties new college graduates face repaying student loan debt–now a cumulative $1.7 trillion in the United States–many are questioning whether the cost of higher education is worth the potential reward of higher income.
After all, two of the richest men in America, Mark Zuckerberg and Bill Gates, did not hold college degrees. While both went to Harvard, neither earned a diploma, and they benefited from on-the-job training as founders of Facebook and Microsoft, respectively. Although the college versus workforce debate is more relevant than ever, there are important factors to consider before forgoing a college degree.
- As the cost of college has risen, so has the demand for college graduates along with the economic penalties from forgoing college.
- The pay gap in weekly earnings for those with a degree and for those without a degree is significant.
- In 2021, the average weekly earnings for high school grads was $809 versus $1,334 for those with bachelor's degrees.
- Two-year-degree holders hardly fare better than most high-school graduates with median earnings of $938 per week.
But Wait! College Does Pay Off
As the cost of college has risen, so has the demand for college graduates along with the economic penalties of not obtaining a four-year degree. In other words, it's important to consider income earned as a college graduate versus the income earned for only having a high school degree.
Below are the average weekly earnings for workers in the United States, according to the Bureau of Labor Statistics (BLS), broken out by education level.
- Without a high school diploma: $626
- High school graduates: $809
- Bachelor’s degree: $1,334
- Master's degree: $1,574
There is a significant pay gap in weekly earnings based on whether workers had a degree and for those who chose not to get either a high school or college degree.
The wage differential reflects, in part, a shift in the nature of the workplace leading to few high-paying low-skilled jobs. For example, there are fewer well-paid positions involving physical labor, such as manufacturing and farm work. Instead, the economy has shifted to more knowledge-based jobs, such as computer programming and marketing, where a bachelor’s degree is required or preferred.
The College Investment
If you're not convinced yet that it's worth going to college, studies show that the lifetime median return on an average bachelor's degree is 287.7% Not a bad deal for a four-year investment. On average, a public university costs approximately $22,690 (in-state); a private one, $51,690.
The Hard Reality
According to a 2019 study, nearly 45% of high school kids surveyed said that a high school diploma would be enough to provide the skills necessary to become successful workers, as reported by USA Today.
However, the data from the BLS, shown earlier, demonstrates that those with at least a bachelor's degree will earn 72% higher weekly wages on average than those with only a high school degree.
High-school graduates are increasingly being penalized in a knowledge-based workforce. As a result, today’s high-school grads are more than three times as likely to live in poverty than their predecessors.
Not All Degrees Are Equal
When deciding whether a college degree is worth the investment, it's important to consider that not all degrees offer the same income opportunities.
Unfortunately, according to the BLS, two-year degree holders hardly fare better than most high-school graduates with median earnings of $938 per week versus $781 per week for high school grads.
According to data from the Fed, the majors with the highest median are:
- Computer Engineering: $74,000
- Computer Science: $70,000
- Aerospace Engineering: $70,000
- Chemical Engineering: $70,000
- Electrical Engineering: $70,000
- Industrial Engineering: $69,000
- Mechanical Engineering: $68,000
- Miscellaneous Engineering: $65,000
- Civil Engineering: $63,000
- General Engineering: $62,000
What On-the-Job Training Offers
But what about learning on the job? Is real-world experience preferable to an academic education? On-the-job training is often free, or you may be paid. Unfortunately, many formal training programs have fallen victim to corporate spending cuts, although there are still fields where hands-on training is available.
Industries in which guilds and unions dominate, such as construction trades like plumbing, carpentry, and electrical, have traditionally offered apprentice programs as a means of entry. All three major unions for electricians, for example, offer paid apprenticeships with on-the-job and classroom training. There is similar training for the growing fields of telecommunications installers and green-energy technicians.
However, these are not casual commitments. All of these industries require at least 2,000 hours of on-the-job learning, with some requiring as many as 4,000 to 6,000 hours.
Chefs and other kitchen staff often start their careers by learning and earning through a combination of hands-on training and classroom work. Although culinary school is an option, it is not a requirement. The American Culinary Federation offers formal, multiyear apprenticeships, while some vocational training programs place students in internships.
Another option for on-the-job training for white-collar work is sales. Real-estate brokerages and telephone-sales operations typically offer real-world training.
Probably the most extreme form of on-the-job training is entrepreneurship where starting your own business teaches you how to manage employees, cash flow, and inventory while simultaneously marketing your new business and negotiating with suppliers and customers.
The U.S. government has put a focus on high-tech apprenticeships as a fast track to a middle-class paycheck, with the Department of Labor pledging $100 million in grants in 2020 to develop public-private apprenticeship programs in advanced manufacturing, healthcare, and information technology.
Is Technical Training Better Than a College Degree?
Whether or not technical training is better than a college degree will depend on what the individual wants to pursue as a career, how they want to spend their money on education, and more. Neither is better or worse. Technical training means going to a trade school, which can be a better option for those interested in pursuing a specific trade and not spending as much money and time on a traditional four-year bachelor's program.
Is It Better To Go to College or Start Working?
Neither option is better or worse. It depends on what best suits the individual. Studies show that people that go to college earn more and are less likely to experience unemployment. That being said, college is not for everyone, the time investment may not be worth it for some, and the cost is extremely high.
What Is More Important, Work Experience or Education?
Both work experience and education are important. Work experience allows you to demonstrate to future employers that you have the experience to do the job, which will help in getting hired. This matters more as your career progresses; however, without any education, it is more difficult to get certain jobs.
The Bottom Line
When considering the income opportunities, the decision to get a four-year degree or skilled professional training is critical when thinking about long-term earnings potential.
Even if getting a college diploma means taking on substantial debt, research suggests that throughout a career, college grads will still come out ahead financially; however, your interests, ambitions, and aptitudes should ultimately determine your approach to higher education and whether your career path begins with academia or with real-world experience. It is possible to become wealthy with only a high-school diploma; it's just a lot less likely.