The investment that doubles your income and keeps on giving
According to the AMP-NATSEM’s Smart Australians income and wealth report, those with a university degree are likely to earn almost twice as much as their peers in the same industry with no university degree.
Grattan Institute research underscores the significant impact of a degree on lifetime earnings:
· A male with year 12 equivalent earns $1.7 million whereas a male with a bachelor degree earns $2.8 million.
· A female with year 12 equivalent earns $1 million whereas a female with a bachelor degree earns $1.8 million.
These figures also highlight the difference in income across the sexes, but that nut is well beyond the scope of this article to crack.
Taking the time to earn a degree is worth on average between $800,000 and $1.1million. Now that is a great investment.
A university degree also impacts employability, with the OECD’s Education at a Glance 2017 report showing unemployment rates in Australia are significantly lower for those with a degree than those without.
Another way to think about the value of education is to reflect on the number of hours you wish to devote to income earning activities. Let’s say you’re happy with a typical 40-hour working week. You could sell those limited hours for $20 per hour, in which case you’ll make a little over $40,000 per year.
But if you find that you need to earn $80,000 to live the life that you want, do you want to work 80 hours a week? Probably not. So the answer must be to get more for the hours you give. And the way to earn more is to provide more value through more skills and expertise.
Getting a higher rate per hour of available working time could also provide you with the flexibility to reduce your hours worked. If your need is $80,000 of income each year, and you can generate that in 30 hours per week — happy days.
Now perhaps many of us would keep working 40 hours and just earn more. Get a better car, or some other form of lifestyle inflation. And that’s fine — but it’s great to have that choice.
There are few more powerful enablers to climbing the income ladder than increased skills.
Sarah Kessler’s great book Gigged, identified that in the modern economy, with far less job security than was once the case, highly skilled workers did well — they had negotiating power and could choose between maximising income, or trade income for more time. Lower skilled workers however — drivers, cleaners, and the like, were the losers from this new world. Their jobs get outsourced, or hourly rates stagnate. In many cases, technology ultimately makes then redundant entirely.
Education is like hitting the fast forward button. Make sure your remote doesn’t have flat batteries.
Paul Benson is a financial planner and creator of the podcast Financial Autonomy.
