Study topics dictate your earnings gap
Getting degree can earn you million-plus more over lifetime, depending on subjects
Getting a degree can earn you a cool $1.3 million more over your lifetime than leaving school and going straight into work — but the gains vary wildly depending on subjects studied.
New research by Universities NZ confirms that a bachelor’s degree in medicine is still by far the most valuable, earning an average $3.5m more than a school-leaver over a lifetime, well ahead of an extra $2.7m for a bachelor of law and $2.2m more for a bachelor of civil engineering.
But a bachelor’s degree in tourism gives you a paltry lifetime advantage over a school-leaver of just $44,000.
Degrees in personal services, complementary therapies and “other education” (excluding teaching) actually reduce your lifetime income compared with going straight from school to work, after allowing for course fees and time spent studying.
The Herald has used the data to create a calculator showing how much extra you are likely to earn over your working life, depending on your chosen subject and qualification level. It also shows how old you will be when you break even on the extra costs of your study.
The research, based on 2018 Census data, shows the average advantage of getting a degree over a schoolleaver has shrunk by 15 per cent since the 2013 Census — from an extra $1.483m over a lifetime to $1.263m.
Ministry of Education research also shows the financial advantage of higher education has been falling since 2002 because more people are getting degrees and because of big increases in the minimum wage.
The proportion of employed people aged 15 and over with degrees more than doubled from 13.6 per cent in 2001 to 28.5 per cent in 2018.
And after adjusting for inflation, the adult minimum wage jumped by 57 per cent in real terms from $10.50 in 1997 to $16.50 in 2018, expressed in 2018 dollars.
Universities NZ chief executive Chris Whelan said the buoyant job market in 2018 also boosted schoolleavers’ incomes, reducing the advantage of getting a degree.
However, that factor is likely to have reversed this year with the jump in unemployment caused by the Covid-19 lockdowns and border closure.
“Degree-holders were relatively unaffected by the higher unemployment in 2013. School-leavers without skills were much more affected,” Whelan said. “It would be interesting to do the same exercise in a year’s time, because we are heading into a period of higher unemployment and I would expect to see that gap actually rising again.”
In the Universities NZ data, the age when you become better off than a school-leaver assumes that you take the “standard” time off work to study after leaving school — six or 12 months for a level 4 qualification, three years for a bachelor’s degree (level 7 on the Qualifications Framework), four years for an honours degree (level 8), five years for a master’s (level 9) and eight years for a doctorate (level 10).
The analysis assumes students don’t work part-time while studying, take out the median student loans for course costs and living expenses, and pay higher taxes after starting work until the loans are repaid.
On that basis, someone with a bachelor’s degree would overtake a school-leaver financially by age 24 with a degree in librarianship, by 25 with one in computer science, 26 with a civil engineering degree and 28 with a degree in accountancy or medicine.
But people with degrees in business studies, law, most science subjects, social sciences, nursing and teaching would not overtake school
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Check out our careers calculator at nzherald. co.nz to see how much you could earn
leavers until their thirties.
Lifetime earnings were calculated by adding the average incomes of people with each qualification who were employed on Census day in 2018 in each age group.
On average, people with level 4 qualifications, which include most trades, earned 21 per cent more than school-leavers over their lifetimes after deducting the costs of studying.
People with degrees earned 47 per cent more, those with honours 60 per cent more, master’s 58 per cent more and doctorates earned 76 per cent more than school-leavers.