How to earn an extra $300,000
A bachelor’s degree can net you a cool extra $300,000 over a lifetime, compared with just a high-school education.
This is according to a report from Liberty Street Economics, which explains that, using “basic math,” they’ve found that “the value of a bachelor’s degree for the average graduate has held near its all-time high of about $300,000 for more than a decade.”
While the data is American, a quick check with Statistics Canada shows that the discrepancy is comparable in the True North Strong and Free. The average Canadian lifetime income in 2007 for someone with a secondary education was $585,200, while the average lifetime income for someone with a bachelor’s was $848,700 – a difference of $263,000.
To get its estimate, Liberty Street measured the costs and benefits for the average college graduate. Costs are the average tuition fees plus “opportunity costs” which are the wages a student gives up to be in school. Benefits are the “college wage premium,” which are the extra earnings one can expect after earning a degree. They also factored in time to recoup the costs of education, which Liberty Street says has been cut in half over the last 40 or so years.
- “We estimate that the value of a college degree fell from about $120,000 in the early 1970s to about $80,000 in the early 1980s, before more than tripling to nearly $300,000 by the late 1990s, where it has remained, more or less, ever since. Despite drifting down somewhat in the aftermath of the Great Recession, the value of a bachelor’s degree has remained near its all-time high.”
The chart below shows the “Net Present Value” of a Bachelor’s Degree from 1970-2013.
There are a few issues with arguing causality here. One is that the growth of highly-paid jobs in sectors in which a degree is not required – software development, for example – coupled with the number of people who are eschewing formal education in favour of self-teaching and on-the-job training, means one can’t be certain that history can predict the same future success.
Our own research has shown that, while Canadians are better educated than we have ever been, employers really don’t care about your education.
Liberty Street adds, meanwhile, that people who earn college degrees may simply have different natural skills and abilities and might have earned the higher salaries whether they went to college or not.
Also, it obviously matters what you study. A recent report on the highest and lowest-paying degrees listed Petroleum Engineering, Pharmacy Pharmaceutical Sciences and Administration, and Mathematics and Computer Science as the three highest, and Counseling Psychology, Early Childhood Education, and Theology and Religious Vocations as the three lowest.
Choose your major wisely.
The “Net Present Value” of a Bachelor’s Degree 1970-2013
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(Image credit: Liberty Street Economics)