What young graduates earn when they leave study

People take tertiary education for many reasons. They think about what they enjoy, what they are good at, what they are capable of and what will get them started on a career. Good careers are associated with better health, better well-being and more satisfying lives. So many young people are making their tertiary education choices to gain the skills they need for satisfying and rewarding work. They use a range of information sources to help them make these choices. The information in this report is designed to add to the data available to young people facing those decisions.

This information is not just important to students and to their families. The Government makes a very large investment in tertiary education each year – funding tertiary education providers, providing subsidised student loans and granting student allowances. One major purpose of the Government’s investment is to help improve the New Zealand economy and society by raising the level of skill in the population – which helps make our society more productive, contributes to the creation of wealth and leads to better social outcomes.

Studying the earnings of graduates is one way of looking at the contribution that the tertiary education system is making to New Zealand’s society and economy. So the information in this report contributes to an understanding of the value New Zealand receives for the investment we make in tertiary education.

Read the full report from the Ministry of Education.

domgradearningsHigh school students thinking about career options can play around with this excellent tool at Careers New Zealand that shows how different degrees have different earnings profiles. There is also good data about how getting honours or a master’s affects earnings.

Some people don’t like thinking about tertiary education in this way. They should check their socio-economic privilege! Most incoming undergraduates at New Zealand universities need their investment in their education to pay off in the labour market. If they get it wrong, there are significant consequences that can take years to recover from.

Considering the cost of administering the student loan and student allowance scheme, making tertiary education tuition free or forgiving student loan balances would probably be indistinguishable in cost from maintaining the status quo if you discount back future repayments.

The Value Of Online Education

The current labour market requires a university qualification in order to obtain employment. That’s pretty much a general rule. If you disagree, try obtaining well paid employment without either a university qualification or a trade certification. You will be an outlier if you are successful.

The value of online education, in my opinion, is that it enables self-starters to obtain the sort of education that a university qualification should be giving them but doesn’t. For reasons I haven’t yet wrapped my head around, my learning at university has been less than my learning online.

There is a major problem with learning online though – it’s only possible to realise the value of what you’ve taught yourself once you are employed and utilising those skills. There is a chicken and egg problem here – a lot of young people will not be given the chances they need to figure out where their comparative advantage lies in the labour market.

This increases the likelihood of sub-optimal investment in the university qualification itself. What degree you take matters, but what you major in matters even more. The Ministry of Education recently released a study showing that some majors clearly have an earnings premium over other majors.

In that sense, if you feel like you’re not learning anything valuable at university, online education is the recovery tool. Without forking out $800 a paper to simply jump through the hoops, you can exchange your time in exchange for far more interesting course content and skills.

This links into what Tyler Cowen was talking about in Average Is Over with respect to conscientiousness. If you can work through a textbook outside of class, do the problems and build a solid understanding of how that area you’re interested in works, you can do it for other fields as well. There’s a cumulative effect to applying yourself to online education – you build experience using the tools, you build experience sticking to a schedule and you gain more knowledge with which to identify other knowledge gaps to be closed.

I like learning new things and developing new skills – particularly IT related ones – but if it wasn’t for online education and the enormous amount of free resources available on the internet, my love of learning would have been destroyed by university. That’s something I’ve discussed at length with other people who have similar interests – rigid orthodoxy at university might signal reliability to future employers but it drums out any creative spark necessary for competitiveness in the skills market.

Why Don’t More Students Blog When It Is A Cheap Signal?

I have been blogging for years. This blog is the latest incarnation in a string of blogs that have helped me find a voice, figure out what sort of tribe I belong to in economics (Hint: not at all Neo-Keynesian) and provide a cheap signal to people who Google me.

When we are living in the Zero Moment of Truth where the first few Google results around your name are incredibly important, you have to own that space. It is simply sub-optimal behaviour to not have some online presence linked to your real name. Facebook and Instagram do not count here.

Some of my posts are a bit ranty, some of my posts are wonkish but some of my posts are pretty fast pointers to important stuff like RBNZ releases. Over the weekend I was reading about the change in the media industry in New Zealand because of the internet.

Tom Scott, publisher of the National Business Review, is quoted as saying that he and Barry Colman reckoned that no more than a few thousand people are prepared to pay for local business news. That’s reflected in the ~10,000 print, online and organisation IP subscriptions to NBR products.

But StopPress, the NZ Marketing Magazine website, has quickly become one of my favourite NZ business websites. And here lies the rub for students – with a lot of free time, why are you not running a blog in your field of choice? If an editor somewhere likes your post you’ll get some traffic from it and who knows where that could lead. Maximising the potential upside from a random visitor is smart.

I cannot get my head around the dearth of fellow econ student bloggers. The internet is a free repository of information and the annual costs are trivial. I spend no more than $100 on the domain name registration and hosting costs. The time spent blogging is no more than 3-4 hours a week.

Perhaps because I consume a lot of economics and finance information and am actually interested in economics, I find my blogging a hell of a lot more valuable and enjoyable than my university coursework.

In fact, the economic blogosphere pointed me in the direction of the Journal of Economic Perspectives and that has added more value than almost any paper I have taken at university. When Google Reader shutdown and people said RSS feeds were dead, I laughed.

But most of all, the return on investment from this sporadically updated blog on economics and other things that interest me is high. I have interesting Twitter and email correspondence with people who both criticise or agree with what I’m writing about.

The New Zealand economics blogosphere is small, but there is always room for more voices. One thing that makes me very concerned is the antipathy towards “economics outside the coursework” I’ve witnessed from some fellow students. It’s as if the internet adds no value and that only Approved Official University Coursework can be used in discussion of policy or the real world. That’s ridiculous!

 Do you think more economics students should blog? Are you a student who blogs about economics and I haven’t seen your blog yet? Comment here or tweet me @brennansmacro and I’ll add you to my blogroll.