Employers often indicate that they look more at employees' skills and ability to do a job than at their level of formal education. However, most studies of the correlation between formal education and employee wages strongly support that more education equals more money. Naturally, an employee's ability to get promoted and to see pay raises increases with performance, but formal education often means a foot in the door at a higher entry-level salary.

Lifetime Earnings

Education is an investment that doesn't guarantee more income. However, an August 2011 report from the Georgetown University Public Policy Institute showed clearly that more education usually leads to higher lifetime earnings. The report compared the lifetime earnings of a typical bachelor's degree earner with those of workers with varying degrees of education. Only 14.3 percent of high school diploma earners made more money in the study than bachelor's degree holders did. Similarly, only 28.2 percent of people with an associate degree made more than those with a bachelor's degree. At higher levels, 61 percent of master's degree and 73 percent of doctoral degree earners made more than someone with a bachelor's degree.

Short-Term View

Typically, people take a shorter-term view when comparing the costs and time for education against income opportunities. The Bureau of Labor Statistics completed a study in 2012 that showed the median weekly earnings of people with different levels of education. It showed significant increases in wages across all educational levels. At the greatest extreme, the difference in median earnings between a high school dropout and professional degree holder was nearly 268 percent. A typical bachelor's degree holder earned 20.4 percent more than someone with only a diploma.


The Georgetown report did reveal some startling differences related to ethnicity, gender and education. Latinos and African-Americans with master's degrees can expect to earn similar lifetime earnings to white workers with bachelor's degrees. Additionally, the study revealed that women still face a significant wage gap against men. A woman with a bachelor's degree has a similar lifetime earnings projection to a man with some college, but no degree.

Return on Investment

When contemplating educational opportunities, it is important to weigh costs against potential earnings gains. According to the educational website WorldWideLearn, completing high school offers the greatest lifetime return relative to dropping out. A diploma holder will typically earn over $1 million more than a dropout will. An undergraduate degree provides the second greatest potential return, followed by an advanced degree, such as a master's, doctoral or professional degree. The relative variance in pay depends somewhat on the degree program and industry.

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