What is the Value of a Master’s Degree?

09/01/2014
HIGHER EDUCATION
Marshall G. Jones

What is the value of a master’s degree? The field of economics and the business sector tell us that the value of any commodity or service is what people are willing to pay for it. In 2008 the U.S. business sector valued master’s degrees at more than $3.8 billion. That is the amount that U.S. companies reimbursed their employees for graduate coursework. U.S. companies clearly place a premium on employees with a master’s degree. Some examples include:

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  • Raytheon technologies pays up to 100 percent of up front school costs for approved or mandatory education tuition and fees.
  • Deloitte identifies top performing business analysts and provides them with up to $10,000 a year in reimbursable tuition costs. Graduate degrees are one of the pathways to promotion at Deloitte.
  • Amazon, the online retailer, offers tuition reimbursement for coursework even if that coursework is not related to an employee’s current job.

Why do companies invest in the education of their workers? Baltimore Gas and Electric (BGE), another company that offers graduate tuition reimbursement, says of their “Total Rewards” program detailing compensation: “Professional advancement is important to everyone at BGE. Employees who continuously update their skills are more satisfied with their work and contribute more to our collective success.” And that is pretty much it in a nutshell. Successful companies want good employees. Employees that are better prepared contribute to the bottom line. And companies are willing to invest capital to make more capital.

Graduate study calls on a student to move beyond being a consumer of information to become a producer of information. Through advanced study in a discipline, and under the tutelage of qualified faculty, a graduate student learns to apply knowledge to create new knowledge. We tell our graduate students that your goal is to contribute to the body of knowledge in your field. That contribution may be global in reach, such as a traditional report of original research, or it may be local, such as helping your organization improve on practice or product. That is not to say that only people with graduate degrees can improve practice or product. But it is to say that graduate study in your field exists for that very purpose.

Master’s Degrees in Education and The Master’s Bump

So what about education? In education, graduate degrees prepare teachers to contribute to the body of knowledge in their fields, both globally and locally. Educators may seek a graduate degree to change career directions, such as becoming a principal or a curriculum coach, or they may seek a graduate degree to become better at what they do. However there is another reason people in education seek master’s degrees: the master’s bump.

The master’s bump is an automatic pay raise for teachers who earn a master’s degree. Most states historically have offered that raise. North Carolina recently stopped paying teachers for master’s degrees. And other states are cutting back on the practice severely. Tennessee, Indiana, Louisiana and New Jersey are all states that have either cut the master’s pay bump, or have adopted policies that provide raises only for certain kinds of content specific master’s degrees, as in mathematics or the sciences, and not for master’s degrees in education. The reasons for this are, like most issues in education, complicated. One reason is an increased focus on test scores. State officials want to pay for performance, not credentials. But probably the most significant reason is money. During the great recession of 2007, tax revenues dropped precipitously, and states, feeling the crunch, cut budgets everywhere. Many public employees saw not only pay freezes, but pay cuts as states tried to figure out how to offer vital services with significantly less money. State legislatures with a political predisposition towards spending less government money looked carefully at expenditures, and the master’s bump suddenly received a lot of scrutiny.

The Sheepskin Effect and The Master’s Bump

A policy brief published in July 2012 by The Center for American Progress accelerated that scrutiny. The brief titled “The Sheepskin Effect and Student Achievement: De-emphasizing the Role of Master’s Degrees in Teacher Compensation” provides an interesting analysis on per pupil student funding, and it raises some interesting questions. Namely, should teachers get a pay raise just because they earned a master’s degree? Or should there be other measures considered as well, such as student performance? The report was interpreted by many people in many different ways. One of those interpretations was that there should be no pay raise for teachers based on a master’s degree. Policy makers in North Carolina were early adopters of this position and ended the master’s bump for teachers in 2014. I have heard many people reference “The Sheepskin Effect” and say: “studies show that there is no value to the student if the teacher has a master’s degree.” (While those studies may exist — I haven’t found them) There is empirical evidence that a teacher with a master’s degree has a positive impact on student performance.

Hard Data on the Value of a Master’s Degree

The National Center for Education Statistics (NCES) (http://ed.gov/timss/) provides tools to analyze international education data. Data from 2011 clearly shows evidence that students whose teachers have master’s degrees perform nearly 20 points higher on standardized tests of mathematical ability. Indeed all teachers in Finland are required to have master’s degrees, and Finland is largely touted as the gold standard of a high quality education system. In the “Sheepskin Effect,” the authors raise this very point, but go on to say that teachers in Finland are drawn from the top 10 percent of their graduating class. And that is a talent pool much different from what we have in the U.S. So what about the U.S.?

The National Assessment of Educational Progress (NAEP), also known as “The Nation’s Report Card” tests fourth and eight grade U.S. students in math and reading every two years. Looking at the data from 2011, student’s whose teacher had a master’s degree scored higher — at a statistically significant level —than student’s whose teachers had a bachelor’s degree. This is true for math and reading and has been the case for every testing year since 2005, the first year NAEP began tracking this data (Math data: http://nationsreportcard.gov/math_2011. Reading data: http://nationsreportcard.gov/reading_2011).

So What Does This Mean?

The data from NCES and NAEP demonstrate that there is a value for students if their teachers have a master’s degree. But I’d be the first to remind us that while these represent some pretty strong correlations, they don’t provide causality. Which is to say, as is true with most issues in education, it’s complicated. “The Sheepskin Effect” argues that while it is true that all teachers need further professional development, not all master’s degrees offer appropriate professional development for teachers. I agree. Completely. We all know that there are master’s programs that provide little more than the sheepskin. But we also know that high quality master’s programs do provide appropriate professional development that benefits not just the teacher, but their students as well. We are often told that education should be run more like a business. I say let’s try it. Let’s invest in our employees to improve practice and product. The question is, are we willing to pay for it?

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