Senior execs: want more compensation? Get an MA and move to the US

3 minute read

A study of data from 6,000 senior executives finds that qualifications still have a big impact on compensation level, with the UK lagging behind the US. But with the cost of education increasing, is it worth it?

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Senior executives with a master’s degree can earn between $42,000 to $63,000 (£32,000-£48,000) more than their counterparts, according to data from executive compensation database The Pay Index.

A snapshot of the current global data on The Pay Index, produced by human capital specialist Leathwaite, shows that average compensation across the entire database of senior executives is $442,748 (£337,500). Almost 90% of these executives possess 16 or more years industry experience.

When relating average pay against education, Leathwaite found that those who were educated to bachelor’s degree level (46% of the database) earnt on average 3% less than the overall average compensation.

The next highest education classification, which accounted for 44% of the database, were those who possessed a master’s degree. These individuals received a compensation package that was 3% above the average for the database.

The 4% of senior executives who possessed a PhD (or equivalent) achieved a premium of 7.5% when compared to the average compensation. However, the final 6%, classified as school leavers, returned a compensation package that was only 85% of the average for their peer group.

The Pay Index findings – Global Average Compensation

Global compensation average Pay Index

The US versus UK

Nearly 80% of The Pay Index database is made up of senior executive data from the UK and US and it is clear that the US is ahead of the UK when it comes to opportunity.

Senior executives who did not progress beyond being a school leaver in the UK receive a 24% lower compensation package when compared to those with a bachelor’s degree.

Yet, in the US, there is almost no negative impact at all when comparing the same two education levels, with school leavers only earning 3% less than those with a bachelor’s degree.

Gaining a master’s degree offers the largest jump in compensation across both regions, with average gains of between between $42,000 to $63,000 (£32,000-£48,000) per year.

UK and US compensation versus education

Do the improved financial returns outweigh the cost of the education?

With the difference in annual compensation being as much as $162,000 (£123,414) per year between school leavers and those with a PhD, it appears that investing in further education provides a demonstrable return on investment.

Additional studies from the US complement this viewpoint by showing that over the course of an entire career individuals can expect to earn between $2 million to $3million (£1.5 million to £2.3 million) more if they possess at least a bachelor’s level degree, with the figures increasing further as individuals gain more qualifications (see references below).

Education can frequently amount to $200,000 (£152,000) if you combine costs from undergraduate to PhD. However, the data still indicates that investing in education does provide individuals with a clear return on investment, not just at the senior executive level, but across the broader employment landscape.

The Pay Index was launched in February 2018 and is already being used by thousands of global senior executives to benchmark their compensation. Half the people on the database work within companies of 10,000 employees or more, 90% possess a BA or MA degree and 86% have worked for 16 or more years in industry. The data covers executives in 54 countries and 184 cities.

Fast facts

  • According to a study from the US Census Bureau, using data from the most recent comprehensive national census, adults with PhD degrees earn 7% to 33% more than those with just master’s degrees.
  • In the UK, an undergraduate degree costs £9,200 a year. The prices of Masters and PhDs can vary from £2,000-£3,000 to £10,00 as they are set up by the individual institution. The Kingston MSc in HR Management for example is £9,350.
  • In Australia, the average fees for a doctoral degree are AU$14,000 ($11,200 and £8,500) to $37,000 ($29,600 and £22,500).
  • London Business School’s 18-month MBA programme costs almost £50,000 (around $80,000) in course fees alone, though the school claims an average salary of almost three times that after graduation.
  • US education costs: Moderate college budget for an in-state public college for the 2017–2018 academic year averaged $25,290 (£19,250). A moderate budget at a private college averaged $50,900 (£38,800). The average cost of a master’s degree for students is between $30,000 (£22,867) and $120,000 (£91,500). The total average cost for research-based doctoral programs was $36,600 (£27,900). Professional doctoral degrees averaged $48,900 (£37,300) the same year.
Published 25 July 2018
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