Question

You have decided to do a Masters degree despite deriving absolutely no utility from the material you study in your classes. Why? Given the changing nature of the labour market with respect to the number of jobs you may reasonably expect to have over your working life, do you think getting that one more degree will mean you don’t have to undertake any more formal education? Why or why not?

Suggested solution outline:
Returns to education; including diagram
Some analysis of changing nature of work

Answer 1

The advantages of getting a Master’s degree aren’t merely restricted to theoretical and moral conclusions like “the higher one’s education, the better”. Nowadays, there are numbers to quantify the net present value of getting a Master’s degree which conclude correctly whether it is profitable for a person to get into higher education after completing bechelor's or simply joining the workforce after completing a bachelor’s degree.

Utility refers to the want satisfying power of a commodity. A student can derive utility from class notes in various forms. He can simply enjoy every note and enjoy the concepts taught. He can also go a step ahead and increase utility by putting that knowledge into direct use and imparting knowledge through teaching. However, it is possible that a student derives zero utility from materials taught in class. In this case, only getting the degree becomes of paramount importance. It is possible that students go in for a Master’s degree in spite of getting no utility from study materials, because of the following reasons:

•   In today’s world, competition is very intense. Every firm wants to hire the best in class human capital for increasing its efficiency. This directly translates into hiring students from the best of institutions. This also means that between two candidates applying for the same post, the one with a Master’s degree will automatically get an edge over the one without a Master’s degree. It is assumed that higher the number of degrees, higher is the work efficiency of the candidate. The materials taught to the Master’s student in class might not at all be relevant to his field of work. For example, for a Master’s in Economics, subjects like Marxian Economics and History of Economic Ideas aren’t the least useful to the same candidate beginning a career in analytics. However, the degree and sound knowledge in taught materials is what gets him hired, with the assumption that he’ll learn everything related to analytics on the job.
• Secondly, students with Master’s degree get higher median salary than students joining the workforce with just a bachelor’s degree. They are also absorbed into the labour force at higher designations compared to those with bachelor’s degrees. Wage gaps continue to rise as the wages of those who are lower skilled and educated are far below those with higher education. Thus, getting a Master’s degree is the safer option.
• Thirdly, getting a Master’s degree increases the probability of the person to remain in the workforce. It also increases the possibility of growth within the firm, with faster promotions.
• Fourthly, a wider range of choices is offered to the Master’s student as opposed to the Bachelor’s student which enables the former to choose his preferred area and increase job satisfaction. Thus, weighing out the costs and benefits from stopping at Bachelor’s degree or going ahead to get a Master’s degree, the net benefit derived from bachelor’s is less than the net benefit derived from getting a Master’s in today’s degree-ruled world. Thus, it’s better to invest a few more years in Master’s and earn better benefits rather than stopping at Bachelor’s and earning immediate but lower benefits.

However, despite all the above analysis, one thing worth focussing on is that the nature of labour market is changing rapidly. Labour should be supplied according to needs and demands of employers and not the other way around. Over the years, demand for labour has shifted in favour of the more skilled and better educated. The world is constantly innovating and workin with improved technology. With increased digitalization and heavy dependency on cutting-edge technology, it is only natural that firms would want workers with higher expertise to fit into the ever modern work culture. Additionally, the job structure has become extremely dynamic. Previously it was more difficult to switch departments within the same company. But with increasing number of new kinds of work, the options available have been broadened. Thus, a person with a Master’s degree in Economics might just get an MBA degree in order to be eligible for higher posts with better salary and better job satisfaction. In today’s’ world, no formal education degree goes to waste and getting one Master’s degree doesn’t mean that there is no need for another formal education.

There have been cases where workers with one Master’s degree and another MBA also go in for a second MBA to get a remarkable hike in salary. Better projects are offered to those people and job satisfaction also increases. Additionally, nowadays there has been an increased habit of ‘switching companies’. A person already working in an MNC can switch to its rival company that will be willing to pay much higher packages to absorb the highly skilled candidate. This increases the bargaining power of the individual. Unlike in the previous days where stability in one job meant a lot, and it was a matter of pride to retire from the same job that one started working at, nowadays, changing jobs frequently is required to up one’s resume. Each work experience should be better than the previous one, making every individual compete with his own self when it comes to getting more formal education and acquiring higher skills. Therefore, it is absolutely not true that getting that one more degree means that one wouldn’t need to get another. Employees have to adapt to the very dynamic labour market. Updating degrees and skills are important to keep up with the updated technologies and meeting labour demand. Rather than putting an end to it, that one Master’s degree which led the individual on the path of better career prospects, might just be the beginning of getting a few more formal degrees to make him keep walking on the path of a ‘successful career’.