Do 4-Year Degrees Yield Higher Salaries?

Historically, a 4-year degree has been a lot more valuable than a 2-year associate’s degree. Therefore, for generations this has justified the time and expense because it guaranteed a middle-class life style. However, as I wrote previously “2014 Job Market Uneven For Graduates“. It benefits some in engineering, scientific, R&D, IT and technical areas, but not others.

Additionally, recent research from the Federal Reserve Bank of New York, College Measures and the American Institutes for Research demonstrates that holders of some associate degrees in scientific, engineering and technical fields are actually landing higher salaries, at least earlier on in their careers, than those investing the time and expense to gain BA and BS degrees!

Though this new research does continue to reinforce the notion that a 4-year college degree is worth the investment, it contradicts the long-term belief it is a lot more valuable than an associates degree. The growing body of data from states such as Texas, Colorado and Indiana proves this point. For example, in Indiana, figures show that graduates from Ivy Tech Community College are actually making more than the average 4-year degree graduates of Indiana University!

For example, New York Federal Reserve economists Jaison Abel and Richard Deitz calculated the annualized return on investment for the money invested into a college degree over a graduate’s career, pegging it at about 15% for current graduates. This figure, which far surpasses the typical returns on investment for stocks and bonds, has held largely constant for more than a decade.

However, Abel and Deitz also found that the overall rate of return on a bachelor’s degree and an associate’s degree is very similar. Furthermore, this parallel value has remained constant for several decades in the U.S. jobs market. Though bachelor’s degree holders are earning more on average at about $65,800 than associate’s degree holders $46,300, if when Abel and Deitz factor in the cost of obtaining either degree (with bachelor’s degrees costing $110,000 to $130,000 versus associate’s degrees costing $40,000 to $60,000), the cost versus benefits (wages) remains constant at 15% return on investment for both types of degrees.

Anecdotally, my internal executive recruitment team, other engineering recruitment agencies we collaborate with and even the internal engineering recruiters and technical recruiters at many of our clients substantiate this fact. For example, in a recent search we did for Project and Process Engineers in injection molding, we found that most of the best-qualified candidates in fact had only acquired a technical or scientific or engineering associates degree.

In closing, does this mean that you should lean towards an associate’s degree over a bachelor’s? Not necessarily. It depends upon the field you choose. However, this is a fact you should take into consideration when deciding upon the time and expense of your education.

What are your thoughts?