IN THE COMING months, millions of people in the Northern Hemisphere will apply for postgraduate study. Most will supplement their bachelor's degree with a one- or two-year master's degree, hoping this will set them apart in a job market full of bachelor's degrees.
“The main reason people get these degrees is insecurity,” says Bob Shireman of the Century Foundation, a left-wing think tank in New York. “The feeling that if they want to get a job – or keep their job – they need a master's degree.” Yet, on average, these provide a much smaller wage increase than a bachelor's degree. And a new body of data and analysis suggests that a shockingly high share of master's degrees leaves graduates worse off.
In America, nearly 40% of workers with a bachelor's degree also have some type of post-graduate degree. In the decade to 2021, the number of postgraduate students there increased by 9%, while the number of students fell by 15%. Doctorates needed for academics and long professional degrees like doctors and lawyers need are becoming increasingly popular. But master's degrees still account for most of the growth.
They are an even bigger deal for universities in Britain, which award four postgraduate degrees for every five undergraduate degrees. This has a lot to do with the strong growth of master's students from India and Nigeria, among others. The British have also taken action. The number of enrollments in taught master's programs has grown by approximately 60% in fifteen years.
This is partly due to employers demanding higher qualifications as jobs in science and technology in particular become increasingly complex. But universities are also enthusiastic. In Great Britain, student costs are limited by the government and have barely increased in ten years. Enrolling more postgraduate students – who can be paid whatever the market will bear – is one way to deal with this. America's college-age population will soon begin to decline. College presidents there hope repeat customers can keep their institutions afloat.
According to Georgetown University's Center on Education and the Workforce, the cost of postgraduate study in America has more than tripled in real terms since 2000. The average borrower now acquires about $50,000 in debt while completing their second degree, compared to $34,000 two decades earlier (in 2022 dollars). Nearly half of the money the U.S. government lends to students goes to graduate students, even though they make up only 17% of students. In Britain, domestic masters students paid about £9,500 ($13,000) per year in 2021, about 70% more than in 2011, taking inflation into account.
Students have accepted these costs in part because they assume that lofty qualifications will generally increase their earnings. “Achieving financial returns is not the only reason to pursue education,” acknowledges Beth Akers of the American Enterprise Institute, a right-wing think tank. But “for the vast majority of students… that is the ambition.” At first glance, they make a reasonable guess. In America, full-time workers with a bachelor's degree earn about 70% more than high school graduates. And those following a master's degree can expect an extra 18%.
Yet earnings vary enormously by field and institution. Furthermore, postgraduate students usually come from wealthier families and achieved better grades as undergraduates than their peers. They would generally do well in life regardless of additional qualifications. To calculate actual returns, we need to compare the results of this smart cohort with those of equally impressive people who have decided to decline further research.
Through that lens, the average graduate student won't set aside more than an additional $50,000 over their lifetime as a result of their qualification, according to Preston Cooper, an analyst at FREOPP, a think tank in Austin, Texas, who also considered the fees paid. and potential lost income while studying. Worse yet, students who take about 40% of U.S. graduate courses will either make no extra money or suffer a financial loss. That's a higher risk than undergraduate courses, which Dr. Cooper says have a positive return about 75% of the time.
Because the US data is still somewhat patchy, drawing conclusions like these still involves a lot of guesswork. Things are a little clearer in Britain, where researchers who ask nicely can create a database linking the tax histories and educational achievements of millions of young adults. In 2019, analysts at the Institute for Fiscal Studies, a think tank in London, concluded that a fifth of students would be better off if they skipped university all together.
The institute recently conducted research into the returns on master's programs – with even more striking results. It has been found that graduates with a master's degree earn no more at age 35 than those with only a bachelor's degree (taking into account their affluent backgrounds and higher prior attainment). That finding was “really surprising,” said Jack Britton, one of the study's authors. It also differed significantly from research that used less detailed data.
On both sides of the Atlantic, subject choice is the most important factor determining whether a master's degree increases earnings. In America, returns are particularly high in computer science and technology. They are slightly smaller in other science subjects, partly because a bachelor's degree already increases salaries considerably. Teachers who earn a degree in education tend to earn more, even though wages for the profession as a whole are quite low, because many American school districts automatically raise the wages of those who have them.
More striking are the large negative returns on some subjects. British men who complete a master's degree in politics earn 10% less in their mid-30s than peers who only study the same subject at bachelor's level. Historically, the impact on profits has been around 20%; for English this is close to 30% (see graph 1). Many of the people who take these courses are aiming for a career that they know will pay little, but which they think they will enjoy, Dr. Britton explains. But some continue their studies because they have not yet decided which profession they will pursue. It should probably come as no surprise that these people tend to earn less in the medium term than peers who went straight from a bachelor's degree into a job.
The choice of institution matters, but in most cases less than is often assumed. In America, costs vary greatly per university. But there is not a strong correlation between the price of a master's degree and the amount of money its graduates earn, according to Tomás Monarrez and Jordan Matsudaira of the U.S. Department of Education (see Chart 2). “Brand schools have realized that they can exploit their reputation by offering programs that look very prestigious on paper,” says Dr. Cooper, “but that don't deliver results that justify the hype.”
MBA courses are a notable exception: graduates from the most celebrated institutions earn far more than everyone else. But in other walks of life, acquiring fancy networks while in college isn't as critical to success. The result is that spending money at an elite university isn't nearly as smart as choosing a well-priced course at a less fancy place.
Women are more likely than men to get an income boost from pursuing a master's degree. The British research shows that these qualifications increase women's earnings in 14 out of 31 fields; for men, this only applies to six of them. This seems surprising: men's hourly wages are higher than women's, and the gap widens as education levels increase. But women with higher qualifications do better than women without qualifications because they also tend to work longer, especially when they become parents and are pressured to work part-time or stop working.
The poor results of many master's programs should worry applicants. But they also raise thorny questions for governments. In Europe and America, politicians are accused of unintentionally driving up costs. In 2016, master's students in Britain became eligible for government-backed loans with generous repayment terms. The US federal government limits how much it will lend to students, but since 2006 it has allowed postgraduate students to borrow whatever their universities want to charge. In both cases, easy money has led to price inflation.
A related debate is whether governments should be more selective about which postgraduate courses they fund. In America, credit is offered as freely to people studying “underwater basket weaving” as to people studying law, says Dr. Akers. By 2026, for-profit colleges could be barred from enrolling students who borrow federal money for courses that have saddled graduates with unmanageable debt or failed to increase their incomes. But the new rules will not be applied to public and nonprofit universities, where most students enroll. Instead, these institutions will simply have to warn applicants about courses with poor returns.
Americans on both the right and left of politics agree that college education has gotten “a little out of control,” Mr. Shireman says. That could make it easier to make changes to the postgraduate loan system, for example. But it remains to be seen how the new government will address these issues, says Dr. Akers. The concern, she says, is that Donald Trump's team “could focus more on publicly shaming institutions that are bastions of progressivism than on thoughtful reforms.”
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