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Featured, Op-ed - Written by on Monday, May 11, 2009 18:40 - 30 Comments

Naumi Haque
Is grad school a waste of time (and money)?

As someone growing up in an immigrant family with a strong emphasis on education, it’s somewhat blasphemous to suggest that grad school is a waste of time. However, there does seem to be a growing sense that the traditional ROI associated with higher education is shifting. Rising tuition is being met with fewer job opportunities (especially for PhDs) and a renewed interest in entrepreneurism, while at the same time education in general is coming under fire for its antiquated model of pedagogy.

As an example, a recent study by Skidmore economist Sandy Baum and the College Board, approximates the real lifetime value of a college degree at about $300,000. This estimate is based on the assumption that those with college degrees earn an average of $20,000 more per year than non-graduates, and takes into account the average cost of tuition and books, as well as annual inflation over a forty-year career. This estimate is down from previous calculations of an approximately $1 million payback. Mind you, this is for undergraduate degrees. It begs the question: What about more specialized and more expensive graduate degrees (expensive both in terms of tuition and opportunity costs)?

MBA degrees are a specific point of contention. While conventional wisdom will have people flooding into MBA schools, there is also a sense that maybe professionals should seek to upgrade through less conventional, more productive means. Indeed, the sheen associated with an MBA is tarnished by the fact that many of the financial decision makers that perpetrated the economic downturn were themselves alumni of some of the most respected business schools.

Some recent interviews I’ve done seem to corroborate these findings. Fast Company staff writer and author of Generation Debt, Anya Kamenetz says:

“I’ve never been an advocate of people going back to school and incurring large amounts of educational debt just to have a degree. [...] I’m very interested in what the long term developments are going to be because I think that higher education has been resistant to really fundamental types of innovation and change for far too long. We’ve seen information technology sweep every other industry and raise productivity and raise the potential of what you can accomplish. I think that in higher ed, they’re still working off a 14th century model. It’s lecture classes and it’s seminars and it’s educational requirements that don’t necessarily match where the jobs are these days. So, I think that you’re going to see a lot more students and families re-evaluating the other options out there; whether that be online education, vocational programming, certification programs, or programs that are run by employers. I think it’s actually going to be a fantastic area of growth for the next decade and a half or so.”

Penelope Trunk, author of Brazen Careerist is more colorful in her analysis of the value of graduate programs:

“People are going to grad school for stuff that has no bearing on the workplace. It’s not like we have more critical thinking because somebody knows the history of the little War of the Roses, right? And so, who cares? I don’t see any corporation placing a premium on any kind of graduate degree, except a top 25 business school degree. I mean most MBAs are from shitty schools so they don’t place a premium on that. Most law schools are shitty and people have to go into some other profession besides law because their degree is so bad. If you get a Masters in French and then try to get a marketing position, you’re penalized. You’re actually penalized because you look like you don’t have a clue about how to manage your life because you just spent four years learning French and you’re not using it. To me that just screams obsessive with details, scared to go out into the job market, and purposeless. I mean, I just don’t think anyone is placing a premium on graduate degrees.”

From what I’m hearing, it seems as though college age students are making important decisions about where they’re going to invest education dollars. Some of them are backing into junior colleges or community colleges; others are choosing to forgo higher education because of their financial situations. This would be especially true if their Boomer parents are now struggling with layoffs or delayed retirement. On the demand side of the equation, numbers from the U.S. Bureau of Labor Statistics suggest that overall, the United States will need 18 million new college degree holders by 2012 to cover job growth and replace retirees but at current graduation rates, the country will be six million short. Will this trend towards delaying or abstaining from higher education reinforce the impending knowledge gap among entry-level workers? Some interesting food for thought…


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May 12, 2009 15:24

You are absolutely right in many respects. Many graduate programs do not alert students to the fact that colleges are over-producing Phds. Even though we represent such a small portion of the population there aren’t enough jobs for us at colleges and universities. Further, people with Master’s degrees have a stranglehold on Community College faculty positions as well. If we look to the job market many people believe we are tainted because of the time we spent outside of the workforce.

I would advise everyone to think deeply concerning their choice to go to grad school if it is solely for economic considerations.

But, there are many other considerations in attending graduate school. Too numerous for this comment section though.

John Poole
May 12, 2009 21:24

You go to grad school because you are interested in the topic of study. Any financial incentive has to be looked at as a bonus. And why would an MBA from a “shitty” school be less desirable than an MBA from from a top 25? School choice is very personal and a school can be good for one person but terrible for another.

Also, an MBA is about as outdated of a degree that you can get. I would much prefer someone to have a more specialized management degree. Of course, I’m biased.

May 13, 2009 10:43

I have weighed the very same questions. While I agree with John Poole, above, I simply couldn’t afford grad school – I didn’t even qualify for the loans. In any economic climate most of us don’t have the luxury to study for something just because we are interested in it. This may be positive or negative, depending on how you look at it.
1) If I had unlimited funds, I’d be studying Ukrainian language & culture.
2) Since I don’t, I’m working full-time and taking night courses toward my CPA.
Which option do you think will better contribute toward my future earnings? #2, barring some amazing happenstance.
Which option do you think will better feed my soul, my civic duty, or the world? These questions were not asked in your blog. ROI is a poor judge of usefulness.

While the ‘invisible hand’ accomplishes many amazing things, the market does not always have our best interests in mind. Education, especially graduate education, is supposed to be about more than our future earnings potential. However I agree that our current system is outdated. It isn’t even churning out decent civic minds. Hands-on, practical, critical and creative people will always be successful, in any system. We need to encourage these traits during a lifetime of education, and worry a little bit less about the subject matter.

Naumi Haque
May 13, 2009 22:07

Thanks for the comments. You are all right of course; the qualitative reasons for going to graduate school are still very much in play. What about personal fulfillment, a more enlightened society, and the (questionable) advancement of innovation and growth of analytic minds? All valid reasons for going to grad school… if you can afford it.

May 14, 2009 13:00

Asking a vague, blanket question, like “Is grad school a waste of time (and money)?” isn’t going to get you anywhere very useful. If you rephrased it to say, is grad school in the humanities a waste of time and money? Then, the answer is usually yes to money, but since you can’t know someone else’s utility, then you can’t know if it’s a waste of time. My guess is that it usually is a waste of time, however.

Is getting an MBA a waste of time and money? Again, probably yes to money, more likely yes to time (seems to me, an MBA only has utility if it brings higher earning potential).

Is getting a masters or PhD in math/science/engineering a waste of time and money? Typically no. First, good students are generally paid to go to grad school in these fields (tuition and fees are waived and you are paid a monthly stipend ranging from $1,200–2,000), rendering the question of money mostly moot, not to mention industry jobs for grads with a masters/PhD are abundant and are paid higher wages than those with just a bachelors. Higher wages imply that it’s not a waste of time for most people, and jobs requiring a postgraduate degree are generally more interesting and satisfying.

There’s nothing inherently wrong with most grad school programs, there’s just something wrong with some fields of study today. Focus on areas where the world actually needs more people, e.g., math/science/engineering, and this article is irrelevant. Instead, the thesis of the article would be, go get a masters/PhD because you’ll make more money and do more exciting work!

Dissertation Experience » Is Grad School a waste of time or money?
May 14, 2009 14:47

[...] debate is open at WikiNomics.com [...]

May 14, 2009 21:35

I think it makes sense if you have a specific purpose to learning. I think a lot of people now go to undergraduate as a default option after high school. Like a lot of things in life, it’s what you make it to be. If you go to school just to get a diploma/degree, it’s totally useless. Who even looks at resumes in the real world?

For grad schools to give you ROI, you have to be the one to go in with an attitude to learn as much as you can, exploit the resources such as professors, network, etc etc. It all depends on how you leverage your education to bring into the real world.

Naumi Haque
May 15, 2009 10:00

Rosa, I like “exploit the resources such as professors, network, etc.” :)

Andy, you’re right about the vague question, but it did bring you here to take part in the discussion, didn’t it ;) ? I like your idea if using someone’s personal utility to measure value. However, I also have to offer a retort to your observations around MBAs versus PhD. (Of course, we are both biased here since I have an MBA and I see you are a PhD candidate in math/science/engineering… ) It is a much more complex equation when you account for opportunity cost, time value of money in relation to peak earning years, and personal utility/fulfillment. Here are just a few initial thoughts that come to mind:

Consider the time it takes to get a PhD in any subject: It takes you 4-5 years during your peak earning years, so you not only have an opportunity cost in terms of lost wages, you also have lost investment income, and lost opportunities for career advancement at a high growth point in your career (the last point being especially true in science/engineering). It’s true that once you’re done you may be set as a professor, but you may have also limited your career options if you choose not to go into academia.

An MBA, by comparison is only 1-2 years, but is usually more expensive. Now while it might be the more costly choice in terms of immediate cash outlay, it usually does – as you mention – result in an immediate salary bump, as well as many opportunities for employment. It also injects you back into the workforce at an age (and salary) that would allow you to maximize your peak earning years. Of course you may make some lifestyle sacrifices, so in terms of personal utility and fulfillment you may lose out a bit.

The humanities grad degree is an interesting animal. Under the traditional pure ROI that I originally proposed, it completely loses out. But, what if you think of the difference between pre-grad school salaries of a humanities student versus a math/science/engineering student? Clearly the opportunity cost of a humanities degree is lower. Also, given the potential for employment post-PhD, the humanities people cannot possibly be in it for the money (only half kidding ;) ). It seems to me like a career choice that is more rooted in personal fulfillment, thus potentially scoring higher in terms of utility. In that case, does it really matter if you forgo a salary for 4-5 years and barely breakeven on the degree? I would say probably not.

May 19, 2009 10:41

One of the not-so-secret-secrets of Grad School, and many undergrad programs today for that matter, is that it’s just about impossible to fail out of them. From my personal experience, and from talking with many people, once you get through the door your grades in each class will be slapped on a bell curve, and almost everyone will end up passing. Those that do well enough will then have an opportunity to go to the next level.

So in many cases, I think “Masters” degrees are simply turning into proof that you did well enough at the Undergrad level to get in – which is a much more elegant way to communicate it than (say) putting your marks on your resume, which themselves are so subjective across schools and disciplines.

Naumi Haque
May 20, 2009 13:08

Colleague Tammy Erickson has a related article in HBR where she paints a much rosier picture of the prospects for graduates: “Why Grads Should Take a Gap Year”

May 20, 2009 16:38

Thanks for the reply Naumi. I agree with all you said. To me, opportunity cost is the true drawback of a getting a masters or phd.

As for starting salaries, I can say that the average starting salary for a computer science undergrad is about $51,000/year. With a phd, that jumps to around $90,000/year; those going into academia pull this number down as industry salaries tend to be at least $120,000 for new phd grads (I’m basing this on what my friends have made, so this is probably a little high since I’m at a top school). Unless you’re able to rise quickly in the ranks, a phd, at least in computer science, will quickly pay for itself (plus, you’ll be getting paid around $24,000/year + tuition and fees while doing the phd).

Anyhow, I think the discussion about whether grad school, or even college, is always a plus is good to have. It’s generally assumed that education is always going to help someone. That’s not actually the case, and it’s good to see people talking about it!

May 21, 2009 12:14

For 15 years, I was an top performing executive in the financial industry in Canada which has been relatively stable throughout the past two years however the parent closed my division. I hold an MBA from one of the top B Schools on the planet and it has done squat for me. Unless you have a skill set such as computer programming, engineering or accounting combined with an MBA I would suggest you save your time and money. The B Schools have brainwashed the big institutions into thinking that MBA’s are smarter when in fact the CEO with a BA is the smartest of them all!

Is it worth doing a degree? « BBC World Have Your Say
May 26, 2009 2:11

[...] John comments, I chose my degree subject because I was interested in it, but as Michi says most people [...]

Naumi Haque
Jun 10, 2009 15:12

Freakanomics has a recent post on this topic as well: “The College Bubble” http://freakonomics.blogs.nytimes.com/2009/06/10/the-college-bubble/

Jun 11, 2009 22:50

That’s why you should study in math and science related field… they will pay you for grad school!

Going to college for financial reasons is not the reason to go… if you aren’t motivated out of a passion for your education fueled by your desire to learn, you’re not going to learn as much, you’re not going to be as good on the job… I don’t know it’s what I really believe.

I think it’s sad when people choose degrees for money… but unfortunately so many do…

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Jun 15, 2009 20:03

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John Lyons
Jun 16, 2009 19:42

College, universities are a complete waste of time, money, and effort. Nepotism, croenism, having the right last name is all that matters. The money obtaining these useless degrees is nothing more than a scam and a sham to make those profs (losers who could not get a job in the real world) have a job teaching 20somethings, precolubian art or nanochemistry or some other useless topic with no relevance to anyone but 3 people in china.

Masters, shmasters, it is all a joke. This is a severe recession, no one is hiring. College degree won’t get you jack–it is a racket to get money from imbeciles who believe in education. GO TO THE LIBRARY AND READ A BOOK. That is education. Not listen to some garbage for 45K/yearly tuition by some PhD loser talking about liberal jibber jabber.

Also, in this horrible recession (depression), they are all outsourcing jobs to the mexicans, chinese, and indians because they work really hard and cheaply. That is the american way. love it or leave it or go to grad school to become some prof’s boy/girl.

Bill Barberg
Jun 17, 2009 0:10

A good education is VERY important in today’s business world, but I don’t think that has to require going into a ton of debt to go to graduate school. The path I recommend to people is to work VERY hard at becoming a great learner, thinker, and communicator while getting a good 4-year degree. Then continue with the same study and learning habits, but instead of paying expensive tuition, just buy books relevant for your field and interests and study them on your own. Find professionals that are a few steps ahead of you in the fields you like and actively seek mentoring. Find groups like this to engage in dialogues on what you’re studying. If you seriously study 2 great books a month and watch one educational “webinar” each week, you’ll get a excellent education for a minimal investment. And if you use part of your free time to serve as an “intern” or volunteer to help organizations you believe in, you’ll get more great experience.

Tim Hughes
Jun 18, 2009 15:39

For me, a Master’s degree has proven useful. As many here have argued, I could have learned the same material on my own. Maybe, but that’s not the sole point of a degree.

I could also learn how to wire a house on my own. Regardless, most people will want to see a piece of paper before they’ll trust me to wire theirs. Why would running their business be any different?

A degree simply verifies that the holder has a certain amount of knowledge in a certain field. When starting out in a competitive job market, that is a valuable asset.

Assuming marketability is a factor, there are two conclusions to be drawn here:

1. Never do a grad degree that doesn’t offer you new skills. Few are arguing that a Bachelor’s degree is a bad idea … but a grad degree that just offers more of the same is a waste of time and money. If you have a BA in History, an MA in History won’t open many new doors.

2. Be sure it’s a rigourous degree from a GOOD school. Even the Brazen Careerist author implies that an MBA or a law degree from a top school is a good investment, while the same degree from a “shitty” school is not. There is a vast market for lots of degrees, it’s just that supply often exceeds demand. When this happens, expect the grad from McGill or Toronto to get hired before the grad from Nipissing or Royal Roads.

Statistics may treat all “degrees” as equal, but the job market does not. We should be wary of stats that lead to conclusions that degrees are worth little. Anecdotal evidence is quite contrary; top degrees are worth as much as ever.

GMAT: What is format, subjects etc? - Page 2 - Boris Poker Forums
Dec 4, 2009 18:37

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Dr Kevin Cooper
Jan 18, 2010 2:25

This is a very insightful analysis into the current state of the academia. From what I have observed during my academic career, and therefor still continue do so is that most of the practices are outdated. My greatest hope is pedagogy will be revolusionised with the arrival of various distance learning models and online learning research at both undergraduate and postgraduate level.

What’s a College Degree Actually Worth? 20 Good Answers. | College Stats.org
Feb 1, 2010 21:12

[...] Is grad school a waste of time (and money)? This article at Wikinomics questions the value of a master’s degree, specifically the MBA. While the article looks at the negative side of spending money on higher degree levels, the questions at the end of this piece might make you think twice about forgoing that higher level of education. [...]

What’s a College Degree Actually Worth? 20 Good Answers. « College Life Planning Blog
May 14, 2010 12:30

[...] Is grad school a waste of time (and money)? This article at Wikinomics questions the value of a master’s degree, specifically the MBA. While the article looks at the negative side of spending money on higher degree levels, the questions at the end of this piece might make you think twice about forgoing that higher level of education. [...]

May 27, 2010 1:02

Universities sell people dreams. I think if you have high expectations when you graduate with a PhD this will lead to a great deal of disappointment. How could you not expect a good job after all that work. The reality is one day you have to get a job and with all jobs come with similar obstacles.
I vote for going to the University of life for graduate school. Volunteering at the mission, a library card, a few classes at art school, creating something cool at your regular job, riding bikes around town, taking apart things and putting them back together, building things, and finding new things, following your passion on your own without going back to school- that’s the real deal.

Jun 9, 2010 16:16

I completed a 2-year MSM with a HR specialization. I preferred the MSM because the MBA was too general. Of course there are MBAs that could provide similar specializations, but then I would have been in school for a year longer and paid another $10k-$12k dollars more.

Jun 17, 2010 14:36

Anyone ever heard of a library before? You do not need to be indoctrinated by some idiot professor and pay through the nose to learn something new. Try learning on your own. You can usually download the syllabi from classes online, by the textbooks on Amazon for peanuts and even study in university libraries for free! If you need proof of your learning-go for a certificate in your professional area- they are way cheaper than tuition.

Believe in yourself and you can do amazing things!

Antonetta Matkowski
Jul 15, 2010 5:59

I am usually not the kind of person to submit comments on people’s blog posts, but for this post I simply needed to do it. I’ve been browsing through your site a lot nowadays and I am really impressed, I think you could really become one of the main opinions for this topic. Not sure what your schedule is like in life, but if you began commiting more effort to writing on this site, I’d bet you would start getting a bunch of traffic eventually. With advertisements, it could become a great reserve income stream. Just a concept to think about. Good luck!

Jim Richardson
Oct 5, 2010 1:23

HI, this is exactly what I’m thinking about too. I’m wondering if going for an online MBA will just be a waste of time and even money. Going for a graduate school could risk your current job and earnings. It’s a critical decision to make. What I think is, before deciding on enrolling for a grad school, you have to be sure that you’ll earn something from it too. Going for it is like making an investment for a business, you have to earn a reasonable or better yet, a higher ROI afterwards. This really depends on the person and how the situation will be handled. What program would it be, online or on-campus, part-time or full-time and the program must be valued by employers, or else it will just be worthless.

best graduate business schools
Oct 10, 2010 23:01

I think that MBA is not a waste of money if you are serious in wanting to learn more. I see many colleagues of mine who went to some of the best graduate business schools and pay their professors so that they can pass the course. I have been a strong advocate of higher learning but when I found out about this and the scandals that former alumni of these schools caused, it is very disheartening. However, not all of the people who took up MBA’s ended up as bad apples, some help shaped the industry and have become pioneers on their own industry. I hope that the future graduates would not become liability.

Is grad school a waste of time (and money)? « Not Another Framework
Nov 8, 2010 13:22

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