Question

Define the opportunity cost of getting your degree by analyzing what steps and economic factors a potential student must make when choosing to pursue an education. Given your answer, is getting a formal college education worth your opportunity costs? Why?

Answer 1

Oppportunity cost refers to the benefit that has been foregone by choosing one particular alternative over the other available ones. Since it is a benefit that has been foregone, it is considered as a cost giving rise to the term opportunity cost.

While choosing to pursue a formal education, there is a huge opportunity cost involved since the student loses out on the opportunity to earn while working a job during the course of the formal education. For example, instead of enrolling one in a 4 year bachelor degree, the person might choose to work instead and earn a certain wage. These wages over the course of the duration of education represent the opportunity costs.

Some important factors to consider for a potential student are :

1) Possibility of getting a job without the particular formal education

2) Expected earnings from the job if he takes it up instead of enrolling for formal education

3) Growth rate in earnings in the job role joined without completion of formal education

4) Duration of the formal education ( longer duration would mean a longer time in which wages are not being earned )

5) Possibility of getting a job after the completion of the formal education

6) Expected earnings from the job after the completion of formal education

7) Growth rate in earnings in the job role joined post the completion of formal education

Considering all the factors listed above, getting a formal college education is worth my opportunity cost. The number of job opportunites that have opened up to me has increased considerably post completion of my formal education. The expected earnings and the growth rate of those earnings are also higher than what it would have been without the formal education Apart from these quantitative factors, there are qualitative factors as well such as job security and the job profile, which are better in jobs which require formal education when compared to the ones which do not.