Sunday, July 8, 2012
Mike Butler: University costs and benefits
Universities heavily promote their benefits because bums on seats bring funding. Secondary schools like having numerous pupils going on to higher education because this enhances their status as a quality education provider. Teachers believe in the value of education so push as many pupils as they can towards tertiary.
But other than repeating the mantra “get a good education and get a good job”, there is little data on what graduates go on to do. For instance, Victoria University of Wellington collects data each year on graduate destinations but of the 4671 emails sent out in 2011, only 1281 responses were received (27 percent). Sixty three percent of these were in fulltime work, 22 percent in part-time work, and 15 percent were not working.
There were no job details or any indication of whether the graduates were working in the fields they had graduated in. Neither was there any indication whether a degree was required for the type of employment gained. For instance, of the 807 of this group in fulltime work, how many were continuing the semi-skilled or unskilled work they did while studying, as check-out operators, bar staff and so on.
But the survey did find that on average bachelor graduates earned $40,441, honours grads earned $40,410, masters earned $47,449, and PhDs $67,450. Interesting to note that despite the heavy pressure placed on students to do the extra year, honours grads earn $31 a year less than those without honours.
Arguably, the value of a degree has declined as the number of people with degrees in New Zealand has skyrocketed. Between 1986 and 2009 the number of Kiwis with a university degree went from 100,000 to 538,000.
If the benefits of having a university degree are hazy and declining, what about the costs of study? Working out the costs can be a challenge. Course costs are readily available, but extra requirements that come up through the year are not so apparent. For those students who must live away from home, the cost of food and accommodation for year one can be calculated from student hostel fees.
The actual all-included costs for a three-year bachelor’s degree for one student living away from home from 2009-2011 for parents who were above the student-dole threshold were $66,890.
If that degree got a job paying the bachelor-level average wage of $40,441 ($19.44 an hour), and if a minimum wage annual income is $28,080, the difference of $12,361 means a bachelor’s degree would pay for itself in 3.2 years, longer if the hourly rate is higher. If the graduate could only get a minimum wage job, the degree would have no financial benefit. It is possible that a person could get a $20-an-hour job without a degree, making unnecessary three years of tertiary study. (www.sorted.org.nz had a useful calculator to work this out, although I could not find it when writing this column)
Mounting student debt put the value of university education in the spotlight. One high-profile individual who argues that a degree is not necessary for success is Peter Thiel, an entrepreneur who dropped out of Stanford University and made billions of dollars as co-founder of PayPal. Thiel set up a foundation that offers to pay a couple of dozen of the nation’s most talented students each year $100,000 to drop out of college and become technology entrepreneurs.
In fact, many of the richest people are dropouts, including the late Steve Jobs (Apple), and Bill Gates (Microsoft). New Zealand multi-billionaire Graeme Hart got an MBA after he became rich.
The shortage of data on graduate outcomes prompted Professor Richie Poulton and his team at the National Centre for Life Course Research, based at Otago University, to launch a longitudinal study to find out where a university qualification leads. In the study that started last year, researchers invited 14,000 final-year students from the eight universities around the country to take part. This group represented about a third of the 40,000 students then in their last year of tertiary study. The study will revisit graduates in two, five and 10 years' time.
While awaiting data from the longitudinal study, the value of a degree remains hazy. For parents deciding now, another logical way to go could be to help your university-age son or daughter into a job earning whatever, encourage thrift and the habit of saving, and use the $66,890 otherwise spent on three years of education as a deposit on a $330,000 property investment for the benefit of your offspring. That, depending on the yield, could fund a university education, and you don’t even need to be a technology entrepreneur to do it.
I am a bachelor-level graduate. Somewhere along the track I noticed that it was ones who did not do well at school who bought the gas stations, plumbing businesses, as well as flats and houses, and went on to become millionaires.
at 12:46 PM