Guest Author - Susan Joyce
PBS investment advisor and author Jonathan Pond says one of your best investments is in your career, and what he is really recommending is education. Education level is one of the major factors determining lifetime earnings because it impacts the available career options, job levels and salary, and even employment vs. unemployment.
Educational levels have been increasing throughout the 20th and into the 21st century. In 1940, only 25% of Amercans over 25 had a high school education or more, and only 5% had completed 4 or more years of college. By 2000, over 80% of Americans over 25 had completed high school (or more) and over 20% had completed 4 or more years of college. So, having a "higher education" (some college or better) has become less of a competitive advantage than it was in the past.
A high school diploma is now a minimum requirement for many jobs, as reflected in the data below. Clearly, the more education, the better the salary, and the smaller the likelihood of unemployment.
Education Impacts Employment and Income
A study by the US Census Bureau in 1999 shows the correlation between level of eduction and employment (vs. unemployment) and annual income. Professional degrees (medical doctors and lawyers, for example, both of which are technically doctorate degrees) have the highest payoffs in terms of both employment and income.
Full Time Employment Education Annual Income
83.6% w/full-time jobs Professional degree $109,600
80.9% w/full-time jobs Doctoral degree $89,400
76.1% w/full-time jobs Master's degree $62,300
76.7% w/full-time jobs Bachelor's degree $52,200
74.9% w/full-time jobs Associate's degree $38,200
73.9% w/full-time jobs Some college $36,800
73.1% w/full-time jobs High school graduate $30,400
65.3% w/full-time jobs Not high school graduate: $23,400
Education and Earnings Over a Lifetime
Multiplying this data over an average working life of 40 years, shows very impressive differences in lifetime earnings.
Professional degree - $4,384,000 in lifetime earnings
Doctoral degree - $3,576,000 in lifetime earnings
Master's degree - $2,492,000 in lifetime earnings
Bachelor's degree - $2,088,000 in lifetime earnings
Associate's degree - $1,528,000 in lifetime earnings
Some college - $1,472,000 in lifetime earnings
High school graduate - $1,216,000 in lifetime earnings
Not high school graduate - $936,000 in lifetime earnings
The average person with a Master's degree earns twice as much over a lifetime as the average person with a high school diploma ($2,492,000 vs. $1,216,000). Assuming that education costs $25,000/year and a Master's degree takes 2 years to earn, that additional $1,277,000 in income cost $150,000. No surprise - Jonathan is right - that's a VERY good investment!
These are not hard and fast rules about what will absolutely happen. This is just data with my analysis. It should be correct, on average. You could be, or know, many people who are exceptions. Education is only one (very important!) predictor of employability and income earning ability.