Is your master’s degree worthless? , peppermint

Millions of people will be applying to undertake postgraduate study in the Northern Hemisphere in the coming months. Most graduates will complete the qualification with a one or two year master’s degree in the hope that it will make them stand out in a job market filled with graduate degrees.

“The biggest reason people get these degrees is insecurity,” believes 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 much smaller increases in salary than graduate degrees. And a new body of data and analysis shows that a surprisingly high share of master’s courses leave graduates worse off.

Approximately 40% of graduate workers in the US also claim some type of postgraduate qualification. The number of postgraduate students there increased by 9% in the decade to 2021, while undergraduates declined by 15%. The PhD required by academics and the longer professional degrees required by doctors and lawyers are becoming more popular. But master’s courses still account for most of the growth.

They are even bigger business for universities in the UK, which offer four postgraduate degrees for every five undergraduate students. This has to do with the surge in master’s students from places like India and Nigeria. The British are also getting in on the action. The number of students enrolling in taught master’s courses has increased by approximately 60% over the past 15 years.

This is driven in part by employers demanding higher qualifications as jobs have become more complex, particularly in science and technology. But universities are also keen. In Britain, undergraduate fees are set by the government and have barely increased in a decade. Enrolling more postgraduates – who can be charged fees that the market can afford – is one way to deal with this. America’s university-age population will soon begin to decline. College presidents there hope that repeat customers can keep their institutions running.

According to Georgetown University’s Center on Education and the Workforce, the cost of graduate study in the US has more than tripled in real terms since 2000. The average borrower now accrues approximately $50,000 in debt by the time they complete their second degree, up from $34,000 (in 2022 dollars) 20 years ago. Nearly half of the money the US government lends to students goes to postgraduate students, even though they make up only 17% of learners. Domestic master’s students in the UK paid around £9,500 ($13,000) per year in 2021, almost 70% more than in 2011 after taking inflation into account.

Students tolerate these fees in part because they believe that higher credentials will generally increase their earnings. Beth Akers of the American Enterprise Institute, a right-wing think-tank, observes, “Achieving financial returns is not the only reason to pursue education.” But “for most students … that’s the ambition.” At first glance they seem like a reasonable bet. Full-time workers in the US with bachelor’s degrees earn about 70% more than high-school graduates. And those who earn a master’s degree can expect an additional 18%.

Yet income varies greatly by subject and institution. Furthermore, postgraduates are usually from wealthier families and have better grades than their peers as graduates. Regardless of additional qualifications, they will do well in life. To extract the real returns one needs to compare the results of this intelligent group with those of similarly influential people who decided against further study.

Preston Cooper, former analyst at FREOPP, a think-tank in Austin, Texas, believes the average master’s student will bank no more than $50,000 over his lifetime as a result of his qualification, viewed through that lens. Which also consider the fees paid. And lost potential earnings while studying. What’s worse, about 40% of US students enrolled in master’s courses will either not get any extra money or will suffer financial losses. This is a higher risk than undergraduate courses, which Dr Cooper believes provides positive returns in about 75% of cases.

Because US data is somewhat vague, reaching such conclusions still involves a large amount of guesswork. Things are a little clearer in Britain, where researchers asking nicely can dig into a database linking the tax history and educational achievements of millions of young adults. In 2019 analysts at the Institute for Fiscal Studies, a London think-tank, concluded that a fifth of graduates would be better off if they left university all together.

Recently the institute has examined the returns from master’s courses – with even more surprising results. It has been found that by age 35, master’s graduates do not earn more than those with only a bachelor’s (taking into account their better background and higher previous achievement). The findings were “really surprising,” says Jack Britton, one of the study’s authors. It also differed markedly from research that used less-grained data.

On both sides of the Atlantic, choice of subject is the single biggest factor in determining whether a master’s degree increases earnings. In the US the returns are particularly large in computer science and engineering. They are slightly smaller in other science disciplines, partly because a bachelor’s degree in these already increases salaries significantly. Teachers who earn a bachelor’s degree in education earn more, even if salaries remain significantly lower for the profession as a whole, because many American school districts automatically raise salaries for those who have these degrees.

The large negative returns in some subjects are more shocking. British men in their mid-30s who complete a master’s degree in politics earn 10% less than their peers who only graduated with the same subject at undergraduate level. The impact on earnings is historically around 20%; For English it is closer to 30% (see Chart 1). Dr Britton explains that many people on these courses are targeting careers that they know will be low earning, but that they think they will enjoy. But some people go into advanced studies because they have not yet decided what profession to pursue. Perhaps it should come as no surprise that these people earn less in the medium term than their peers who have moved straight from undergraduate courses into jobs.

The choice of institution matters, although in most cases less than usual. Costs in the US vary widely by university. But according to Tomas Monarez and Jordan Matsudaira of the US Department of Education, there is no strong relationship between the price of a master’s course and the amount of money its graduates earn (see Chart 2). “Brand name schools have realized that they can trade their reputations to offer programs that look very prestigious on paper, but whose outcomes don’t justify the hype,” says Dr. Cooper.

MBA courses are a notable exception: graduates of the most prestigious institutions earn far more than everyone else. But in other areas of life, acquiring a strong network during studies is not so important for success. The result is that spending money at an elite university is not as smart as choosing a good-value course somewhere less fancy.

Women are more likely to increase their earnings after completing a master’s degree than men. A British study found that these qualifications increase women’s earnings in 14 out of 31 subject areas; For men this is true in only six of them. This seems surprising: men have higher hourly earnings than women, and the gap widens with education. But women with higher qualifications fare better than women with no qualifications because they work longer hours, especially when they become parents and are under pressure to work part-time or stop working.

Applicants should be concerned by the poor returns from many master’s degrees. But they also raise sharp questions for governments. Politicians in Europe and the US have been accused of inadvertently driving up costs. In 2016 Master’s students in the UK became eligible for government-backed loans with generous repayment terms. The US federal government sets limits on how much it will loan to undergraduate students – but since 2006 has allowed postgraduate students to borrow as much as 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. Dr. Akers says that in America people studying “underwater basket-weaving” are offered free loans, just like those studying law. In 2026, for-profit universities could be barred from enrolling students who borrow federal money in courses that have burdened graduates with unmanageable debt, or that have not increased their income. But the new rules will not apply to public and nonprofit universities, which enroll the majority of students. Instead these institutions will have to warn applicants about courses with low returns.

Mr. Shireman says Americans on both the right and the left of politics agree that graduate education is “a little out of control.” This may make it easier to make changes to the postgraduate loan system. But it remains to be seen how the incoming administration will handle these issues, Dr. Akers says. The worry, she says, is that Donald Trump’s team “may focus more on publicly shaming the institutions that are bastions of progressivism” rather than on thoughtful reform.