from Amazon
Wednesday, March 16, 2011
Is education a good investment?
Non-sports, but math-centric, post.
One study:
Consider four equally talented 18 year- olds—Joe, Jill, Sue, and Matt.
- Joe takes a pass on attending college. Instead, he decides to become a plumber.
- Jill chooses medicine. She goes to an expensive private college for four years, an expensive medical school for four years, does a low-paying internship for two years followed by a low-paying residency for one year, and finally, 11 years after high school, gets a real job, as a general practitioner.
- Sue and Matt both get bachelor’s degrees in education at the same expensive college Jill attends, but Matt spends an extra two years after college getting his masters.All four of these hypothetical kids settle down in Ohio, remain single, and retire at 62. At age 50, the peak earnings year for all four, Joe, the plumber, makes $71,685 (in today’s dollars). Sue, the teacher, makes $89,584. Matt, the teacher with the master degree, makes $103,250. And Jill, the doctor, makes $185,895. All figures and others used in this analysis are based on earnings data by age, state and occupation.
...
- Jill, the doctor, ... gets to spend $33,666 year in and year out
- Joe the plumber’s sustainable spending is almost as high—$33,243
- Sue, the teacher… has less spending power—$27,608
- And Matt, with his masters ...at $26,503
Beautiful job by Kotlikoff in framing the issue, and working out reasonable scenarios. I’m sure he could have changed the parameters slightly so they’d all be exactly the same.
In Quebec, university is heavily subsidized for its residents, to the tune of 90%. I don’t know what its like in the rest of Canada, but I would presume its heavily subsidized as well. In Canada, our parents don’t save for education. That’s because they are heavily taxed for education (and healthcare) because, well, that’s the way Canadians roll. Its a nanny-state in that respect, but that’s a good nanny. Rich or poor makes no nevermind. (With less disposable income, Canadians also think of saving money, and they don’t put themselves in debt like Americans. Which is good and bad, in that Americans are much bigger risk takers, and Canadians more complacent.)
Anyway, if he were to rerun his study for Quebec, education would presumably pay off. Not only is the cost much lower than in America, but it also gives you mobility to work in the rest of Canada, or, even in the US.
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