Im quoting the richest man on earth here (Elon Musk).
“I have a lot of respect for people who work with their hands.
We need electricians, plumbers, and carpenters. That’s a lot more important than having incremental political science majors.
We should not have this idea that to be successful you need to have four-year college. That is simply not true.”
End of quote.
Imo 4 year college degrees make it easier to get into higher paying jobs than not having a college degree. Higher paying jobs do lead to financial security…ofcourse not having a degree does not exclude one from earning a lot. I just feel having a degree makes the path easier.
I don’t think you can generalize. A 4 year degree in computer science is much more valuable than a 4 year degree in political science, but it’s true you don’t need a college degree to become successful in business. Does it give you a leg up compared to no degree? I think that depends on what degree you get.
This is the problem, at least here in the U.S. We have two or three generations of people who were told, as young people, that a college degree was the way to financial success.
But what happened is that many companies began to require bachelor’s degrees as the “ante” to be even considered for an entry level job. And, increasingly, they narrowed what kind of degrees they were willing to even consider, meaning that many people who got their degrees in liberal arts struggled to even land those entry-level jobs – and, as @What_Exit notes, a lot of them had to take out student loans to get those degrees that did not, in fact, lead to a steady, good-paying job.
And, meanwhile, as the trades became increasingly devalued by parents and students as a legitimate career path, fewer young people even considered them (or were dissuaded from them by their nervous parents).
Well, a big part is that, a few decades ago, companies that wanted people with a degree believed that a liberal arts degree was enough: such a degree proved that you had a well-rounded education, and the employer would then handle giving you the industry-specific training you need.
Now, most companies are looking for not just a degree, but specifically a degree in a field that’s relevant to the company and job.
As @kenobi_65 said, a Liberal Arts degree used to mean you were “educated”. And that meant something. Knowing the classics, maybe a language or two, being familiar with the arts. That meant you were a well-rounded, knowledgeable person that could learn what was needed to do a respectable job successfully.
But that doesn’t really apply anymore. The idea that you can just be a “well read” person and then step into a tech job at Google or an investment banking job at Goldman Sachs sounds insane.
I will note, wrt to the OP, that the claimant (Elon Musk) has a BA in Economics and BS in Physics. So he clearly felt that a 4-year degree was important even though he didn’t really use either of them in his actual areas of business (software at first, with Zip2 and PayPal, and then corporate investing at Tesla and SpaceX).
Right – it became a check-the-box requirement for many employers (both public and private)…
…if not for mere entry, then for career advancement beyond a certain point. Regardless that the jobs may not require that specific level of academic preparation. And then of course it expanded into cases where job or advancement requirements could be adequately satisfied by any general higher education plus continuing training, but as mentioned employers felt they’d rather hire someone already specialized – this being part of the transformation of the purpose of college from becoming better educated to primarily “getting a good job”. This leads to that within the requirement for a higher ed degree, there evolved a hierarchy of its own:
…thus creating the trope/myth of the “useless” Liberal Arts major, which as of 2024 is, if anything, what is really devalued and derided, relative to STEM and to a welcome rediscovery of the value of the technical trades.
Which is an interesting angle on the matter – for the purposes of the exercise, his higher education is just that, education, it was not Job Training.
And “a well read person step into an investment banking job at Goldman” only sounds insane in our time because there is no longer the notion of starting in the mailroom and gradually learning the ropes on your way up. You have to immediately be out there doing the quant work at Big League level.
If you were going to become the worlds richest man by investing in computing, automotive, and space exploration companies, there is no single 4-year degree you could possibly earn that would prepare you to do that.
But if you want the general background knowledge to be able to pull it off, Economics and Physics might be the best possible combination.
I found a CNBC article from Spring of this year that has both the wage premiums and unemployment figures for degreed workers versus non-degreed by year going back 30+ years, up to about 2-3 years ago.
I’ll leave it to the readers of this thread to click through to the graphics, but as of 2021, the wage premium for degreed workers was 66% and as of January 2023 the unemployment rate for degreed workers was 2% and that of non-degreed was 3.7% (so almost double).
With respect to the type of degree (brought up above), the article cites a recent study (March 2024) of this. The study is open access, so I’ll also leave that to those in the thread to read as they feel necessary. However, I will describe figure 1 from the study showing the wages (calculated using locally weighted regression based on data from 2009-2021) versus age for various college degree type versus high school graduates. Every type of degree is higher wage at all ages versus high school graduates. And the lowest degreed wage is for education, not humanities.
Of course, I acknowledge that information carefully calculated from a broad set of population data over a number of years and peer reviewed pales when compared with anecdotal facts about someone’s brother-in-law’s oldest son, but I thought I’d just throw this into the discussion.
if you ARE going to get a degree, the best bang for your buck is either 1) an elite university (Harvard, MIT, Stanford, etc.) where the name recognition and personal contacts you foster will give you the chance for the elite jobs and grad schools or 2) a relatively low priced but respected state flagship school, where you can get a quality education at a reasonable price. The schools you DON’T want to go to are the small lesser known privates who charge $80k a year and don’t have any name recognition outside their local area.
Thank you for bring some very good data to this thread.
The factual answer to the OP is very clearly “yes, a 4-year degree matters”. On average, you are very likely to out-earn a non-degree peer if you earn any 4-year degree, even one in education or the humanities.
Looks like about the worst you could do is be a white male getting an education degree. That is worth “only” a ~4% IRR over just a high-school diploma. A hispanic Female getting an engineering degree is looking at a ~20% IRR. That’s a pretty good investment.
The last two words are kinda …actually critically important.
A lot of posts here are starting out with the exceptions and ignoring the general “on average” rule.
On average, yes, a 4-year degree matters. Full stop, end of discussion. The evidence is overwhelming.
But clearly, it’s no guarantee. And certainly certain degree fields, especially now, will result in higher average earnings. There’s never been a guaranteed path. Nor has there ever been a guarantee that all degrees were considered equally valuable. And certainly there are still people without degrees who can and do very well in life.
Just as having a 4-year degree is no sinecure, neither is a lack of a degree a death sentence. Generalizing to that extent has never made any sense. But it is still true that, on average, getting a 4 year college degree provides a positive ROI over a high school diploma.
I’m a HS dropout 1980. I got a job in tech and had a successful career for nearly 4 decades. Earned big ($500k my final year) and retired at 61. No degree. I was damned good at what I did.
Back in the day, nobody cared what your degree was or from where. QE people had no degrees. Eng people had no degrees. It just mattered what you’d worked on.