How apprentices come up trumps in financial stakes
University is a great option for some school-leavers. But if they want to be better off by the age of 30, they might be just as well advised to consider workbased training and apprenticeships. New research by management consultancy firm Scarlatti tracked the average yearly income, as reported through IRD tax records, of a cohort of
19-year-olds who left school between 2003-07 until
2016, when they turned 32. It found that, by the age of 28, apprentices earned $165,000 more than BA, BCom and BSc graduates.
The Scarlatti research drilled down into the earnings of those who completed degrees including law, medicine and the arts, and those who learned on-the-job with Industry Training Organisations (ITOs). The data can be broken down into specific degrees and occupations. For example, it shows that, by 30, a mechanical engineer earns $185,998 more than an accountant; a plumber earns $21,299 more than a medical graduate; and a flooring installer earns $116,118 more than a lawyer.
Because trainees and apprentices get paid to study, they avoid having to pay off a student loan – which averages $24,000 for all tertiary students, and just under $30,000 for university graduates. It’s fairly intuitive that avoiding student debt and earning while studying gives apprentices a financial head start. But being employed in the industry in which they are training also provides a career head start.
These results back up recent BERL research on the lifetime financial position of apprentices and university graduates. This found that ‘‘earning and learning’’ helps apprentices avoid debt, earn earlier, contribute to KiwiSaver earlier, buy a home earlier and pay off their mortgage earlier. By the end of their working lives there was little to no difference between the net assets of a university graduate and an apprentice.
The two sets of research bust the myth that university graduates are always financially better off. They confirm universities’ claims that people with degrees tend to earn more and have their incomes rise faster. But because graduates start off later, and start off in debt, they are playing catchup until deep into their careers.
Vocational training is an equally valid choice, especially at a time of rampant skills shortages and low unemployment. Currently, only 4 per cent of schoolleavers get involved in an on-the-job tertiary education when they leave school. But smart students should consider it. The Scarlatti research also shows students who did well in their NCEA exams excelled in industry training.
There are more industry trainees and apprentices in New Zealand than domestic university students. And all our 145,000 trainees and apprentices have been given the chance to ‘‘earn and learn’’ by the 25,000 willing employers who hired them.
Changing career structures and new technology mean people must continue to upskill throughout their working lives. Industry training opens the way for thousands of people, who are already part of the workforce, to upskill or change direction without having to stop earning.
We believe young people should follow the career path that’s right for them. Our
website is designed to help them explore the full range of career options available.
Work-based education and training, in which employers and ITOs work together to develop workforce skills, is the best way to boost productivity and respond to changing industry demands.