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Economic Value Added of Engineering Education

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2012 ASEE Annual Conference & Exposition


San Antonio, Texas

Publication Date

June 10, 2012

Start Date

June 10, 2012

End Date

June 13, 2012



Conference Session

Engineering and Public Policy II

Tagged Division

Engineering and Public Policy

Page Count


Page Numbers

25.488.1 - 25.488.15



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Paper Authors


David O. Kazmer University of Massachusetts, Lowell

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David Kazmer is a professor of plastics engineering at UMass, Lowell, currently serving as Associate Dean for the Francis College of Engineering. He is the recipient of more than a dozen different recognition awards, an inventor with more than 20 patents, and the author of more than 200 publications, including two books. Much of his academic work is motivated by industry experiences as an engineer and manager. His teaching and research are in the areas of systems design, simulation, and optimization with a focus on machinery, sensors, and controls.

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Katie Bardaro PayScale, Inc.

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Katie Bardaro is the Lead Research Analyst for PayScale, where she coordinates the analysis of PayScale’s data on workers, occupations, employers, and other factors related to compensation in the U.S. and in markets around the world. Bardaro holds a master's degree in economics from the University of Washington, Seattle, and a bachelor's degree in economics from the College of the Holy Cross in Worcester, Mass.

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Economic Value Added of Engineering EducationAbstractThe United States government is emphasizing Science, Technology, Engineering, andMathematics (STEM) education as a remedy to the gathering storm of social and laborinstability. This paper evaluates the relative value of different undergraduate education optionsas measured by economic value added (EVA). In the traditional corporate definition, EVA is theprofit earned by a firm less the cost of financing the firm’s capital. The same concept can beapplied at the individual level by comparing the expected future earnings of various graduateswith the cost of the undergraduate programs including financing and opportunity costs.Accordingly, value is created when the return on the individual’s economic capital employed isgreater than the cost of that capital.The EVA of different undergraduate programs is statistically analyzed at the national level withvalidation and comparison at the institutional level. The Bureau of Labor Statistics at the UnitedStates Department of Labor annually provides occupational employment data and ten year salaryprojections indicative of expected future earnings for various disciplines; the cost ofundergraduate programs are assessed by national statistics related to graduation rates and collegecosts. Available institutional data are also incorporated to account for varying tuition cost,graduation rates, financial aid packages, placement rates, and graduate salary information.The analysis results indicate that, in general, education pays: higher levels of educationcorrespond to greater expected economic value added. However, the results are informative inthat they show significant disparities outside and within STEM degree programs. Furthermore,the results provide guidance to the selection and execution of undergraduate programs. Ingeneral, greater economic value added was generated by individuals undertaking study at publicrather than private institutions. Demographic data was also assessed as a determinant ofeconomic value added due to related variances in increased financing costs and decreasedgraduation rates.The conclusions support national initiatives related to STEM education as well as minorityrecruitment and retention in STEM majors. However, the conclusions also indicate that there arepotential dislocations growing in the free market for higher education: disciplines and institutionswith low economic value added may not be sustainable.

Kazmer, D. O., & Bardaro, K. (2012, June), Economic Value Added of Engineering Education Paper presented at 2012 ASEE Annual Conference & Exposition, San Antonio, Texas. 10.18260/1-2--21246

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