Is A College Degree Still Worth It?

Dear Reconnomics readers,

I’m back after a long summer break, and I’m kicking things off with a link to a new article on the NY Fed’s web site about the value of the college degree. A team there recently took on the task of calculating what a college education is worth, and their findings are interesting.


As far as method is concerned, here is the approach they took:

To estimate the value of a bachelor’s degree, we measure the costs and benefits for the average college graduate—calculations outlined in detail (with appropriate caveats) in our recent article in the New York Fed’s Current Issues series. The costs of college are the average tuition and fees paid by undergraduates plus the “opportunity costs,” or the wages one gives up while in school, estimated as the average wages of someone with only a high school diploma. The benefit of college is the “college wage premium”—the extra wages one can expect to earn having obtained a college degree, estimated as the average wage of college graduates compared with the average wage of those with only a high school diploma, summed up over a working life of more than forty years.

Their findings suggest that the value of a college degree continues to stay high and continues to be worth the effort and expense to most people:

Why has the value of a college degree remained so high even while tuition has been rising and the wages for college graduates have been falling? The primary reason is that the wages of high school graduates have also been falling, reducing the opportunity costs of going to school and keeping the college wage premium near its all-time high.

Yet, they inject a note of caution as well:

While our estimates make it seem like college always pays handsomely, that may not always be the case for everyone. Our next blog post will look at what happens to the value of college when it takes five or six years to complete a degree instead of four. Our third post will show that when we look at the distribution of wages for college graduates, college actually does not appear to have paid off for a sizable fraction of those who made the investment. To wrap up the blog series, our final post will examine whether there are any recent signs of improvement in the labor market for college graduates.

I look forward to reading the next posts and will summarize them here, of course.

Read more:

Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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