The Economic Value of Master’s Degrees
Evidence from a Large, Urban Public University System
More college graduates in the U.S. are going on to earn master’s, professional and doctoral degrees, even as overall college enrollments are falling. Since 2000, the number of people ages 25 and over whose highest degree was a master’s has doubled to 23.9 million. This surge in graduate enrollment coincides with a growing proportion of graduate students among loan recipients, spurring debates about the value of graduate school and the role of the federal government in protecting student consumers from programs that may be poor investments. Though the number of students seeking graduate education suggests they expect some return in the labor market, only a small number of studies have estimated the economic return to obtaining a master’s degree.
In this study we use administrative data from a large, urban public university system to estimate the effect of earning a master’s degree on students’ average quarterly wages. This study contributes to a growing body of literature estimating the economic value of graduate education and informs current policy debates around the use of earnings for accountability in higher education. In addition to estimating the average effect of earning a master’s degree on wages, we also explore variation in earnings premia across field areas (e.g., Education compared to Business).
On average, students who earn master’s degrees appear to have consistently positive earnings trajectories over the approximately ten years (40 quarters) in which we are able to observe them. While, on average, students who earn a master’s degree experience growth in their quarterly wages post-graduation, there is variation across field areas with the average Business major far out-pacing the average Arts & Humanities major or Education major. Our estimates suggest that, on average, and conditional on being employed in the state, an individual who completes a master’s degree experiences an 18 percent increase in quarterly wages.
When we disaggregate credential completion by field areas, we find that individuals earning master’s degrees in Business, Education, Health and Natural Sciences & Math experience statistically significant increases in their average quarterly wages. Students earning master’s degrees in Education gain the largest increases in average quarterly wages, among the fields of study in our sample (28 percent, compared to about a 16% return for individuals completing master’s degrees in Business). We do not find a statistically significant effect on wages for students earning master’s degrees in Engineering, Arts & Humanities or Services (i.e., programs in criminal justice and law enforcement).
