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Master's Degree Mania: Employers Win, Students Lose

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Here's a statistic I found surprising: Roughly 730,000 master's degrees will be awarded this spring. And it's estimated that another 2.2 million master's degrees will be handed out over the next three years.

I knew a lot of young people were going beyond college, but I didn't know this many were. As I read the data, about 43 percent of college grads are going on to get master's degrees. That percentage is not any higher than 15 years ago, but the overall number of master's grads being cranked out by our universities has soared.

Is this a good thing? Yes and no. Investments in education are often positive, and it's good to know, for instance, that over 40,000 young people will receive master's degrees in engineering and technology this spring. This country badly needs a more skilled workforce.

The problem, though, is that most master's degrees are granted in softer disciplines, and the contribution of all this education to the nation's human capital is questionable. Half of all master's degrees are in just two subjects: business and education. And the number of such degrees has skyrocketed in the past decade: a 50 percent increase in both fields. The third biggest degree area is health care, where there has been a similar surge.

In effect, what's happening is that young people are spending their own money to get the training that employers used to provide as a matter of course. Here, as in other areas of economic life, responsibility and cost is being shifted to individuals.

Start with business. While MBA students certainly learn a lot of useful things, it's also true that many of these same skills can and should be taught by employers. Yet if you're an employer who can choose between a job candidate with or without an MBA, it makes sense to take the one with the MBA, since it will reduce your training costs. In turn, that provides young people with incentives to get an MBA, and the dynamic is self-reinforcing: as more young people get MBAs, more feel they need to get one just to compete in the business job market.

You see the same credential creep in other fields. Journalism used to be a quintessential job that one learned by actually doing, with cub reporters logging time on minor beats before being giving bigger stories. Now, some 70 master's programs in journalism graduate a few thousand young people every year -- which is questionable in itself given the decline of this sector. Many of these programs are not cheap -- Columbia's J school costs $55,000 a year, which doesn't include living costs. Most grads of journalism schools say they learned a lot, but who is that good for? Employers, because they are getting workers who have already paid their own money to learn key skills.

Over-credentialing is arguably most troubling in the education sector, where the largest number of master's degrees are granted. Hands-on mentoring is a particularly useful way for teachers to learn their profession, while the value of master's degrees for teaching has been widely questioned. Yet many school districts pay bonuses to teachers with master's degrees -- to the $8 billion a year. As a study by the Center for American Progress noted:

On average, master's degrees in education bear no relation to student achievement. Master's degrees in math and science have been linked to improved student achievement in those subjects, but 90 percent of teachers' master's degrees are in education programs -- a notoriously unfocused and process-dominated course of study. Because of the financial rewards associated with getting this degree, the education master's experienced the highest growth rate of all master's degrees between 1997 and 2007.

That growth hasn't stopped. This spring, over 185,000 people will receive master's degrees in education. Many of them will carry student loans that won't be easily paid down given that the starting salary of public school teachers is under $40,000 in every state and, in many states, it's under $30,000. Moreover, even as credentialization and debt burdens have gone up for teachers in recent decades, salaries have generally stagnated.

Why do so many universities keep pumping out master's grads when the value of such degrees is questionable? Well, for one thing, these programs are cash cows. Master's students are more likely to pay full freight, in contrast to undergrads and doctoral students.

In short, the explosion of master's degree is great for employers and it's great for universities. It's just not great for all the young people now caught up in an expensive educational arms race.