Tuesday, August 31, 2010

Want a good investment? Get a degree - it's about the best there is

Mainly because it'll probably keep you in work

Aged 18 and looking for an investment that'll return far more than the share market, far more than real estate?

Enrol at university and stay there for four years.

An analysis of a quarter of a century of census data released by the Bureau of Statistics reveals extraordinary rates of return for the lost wages and expenses involved in obtaining a four-year degree - all the more so if you are a woman.

For a man graduating in 1981 the resulting higher lifetime income was likely to produce a return on investment of 13 per cent per annum. A woman would expect 18 per cent.

By 2001 a fresh graduate could expect even more - a lifetime rate of return of 20 per cent per annum for a men; 19 per cent for a women.

And then the return turned down. In a paper posted on the Bureau's website yesterday researcher Hui Wei said by 2006 the return had fallen back to 15 per cent for men, 17 per cent for women.

Taking the edge of the return was five years of very strong economic and employment growth meaning conditions for workers who had skipped university began to catch up...

Phil Lewis of the Centre for Labour Market Research at the University of Canberra says the return for university education is likely to take further hits in the decade ahead as the revival of the mining boom makes all workers more special, not only those with degrees.

"The biggest danger to the lifetime income of a worker without a degree is unemployment," he told the Herald/Age. "As the next mining boom takes hold that'll become less of a risk. Many of the new jobs created are in the construction industry. Wages and going up and unemployment down."

"But the return on a university degree is still huge compared to the rate of interest. I tell my students, especially the overseas ones, that if that have grandparent who wants to put some money into a venture for them, to forget about the stock exchange, buy a university education."

Professor Lewis said the payoff had increased despite the increasing supply of graduates because of the changing nature of work.

"We have moved from an industrial to a service-based economy. The skills that are really in demand are communication skills, the ability work in teams and so on."

"I think that helps explains the very high returns for women. A woman with a degree might work in the finance industry. A woman without one might work in retail."

Published in today's SMH

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