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“It suddenly struck me that that tiny pea, pretty and blue, was the Earth. I put up my thumb and shut one eye, and my thumb blotted out the planet Earth. I didn't feel like a giant. I felt very, very small.” – Neil Armstrong (1930-2012)

Fresh Reads from the Science 'o sphere!

Tuesday, September 05, 2006

Study Harder To Earn More Money?

If you are a student, I have a question for you. Are you in school because you want to make lots of money? Do you believe that higher qualifications actually increase your income?

You say, "Of course it does. Are you too STOOBID to realize that?"

Just wait a sec. Did anyone actually CHECK that it's true?

Who was neuroscientist who discovered that we only use 10 percent of our brains?

Who was the nutritionist who determined that we need to drink eight glasses of water a day?

At Fresh Brainz we are not content in accepting conventional wisdom simply because everyone tells us it's true.

Let me propose a thought experiment!

Imagine six people who stopped school at different educational levels and immediately found a stable job.

Let's say they each found a job with a starting pay (real average salary figures in 2006 Singapore dollars) based on their qualifications alone.

Suppose that they were mediocre workers and only received a nominal 2% increment every year. There were no additional pay rises, and they never got promoted.

Who do you think made the most money?

*Note: The education levels are based on the Singapore system, which is similar to the UK system. Here are the approximate equivalents to the North American system - "O" Levels = Grade 12, ITC = Trade school cert, Diploma = Community college cert.

Well, it turns out that you do make more money with better qualifications, but not that much more. And the payoff is really delayed.

The dude with "O" Levels may have the least starting pay, but he had a real headstart. In terms of cumulative income, none of the other guys could surpass him until age 32.

For a whopping 16 years he was making the most money!

All six guys have to pay school fees, but the cost of education is much higher for university graduates. These three graduates need to pay off their student loans once they finished school, so they didn't start "making" money until about a year later. My figures are based on average tuition fees in a Singaporean university, so for graduates of law schools, medical schools or foreign universities their debt can be much higher.

As for my data on MSc and PhD students, I have already included an average stipend that they receive during their programs. Even so, they can only catch up with the BSc graduate's total income when they are 29 years old.

Of course this graph is an oversimplification in many ways. For example, there aren't many job offerings for "O" Level holders. Also, people with better qualifications may get more opportunities to get promoted.

However, I think the graph helps to illustrate these few points:

1. Time Is Money.

The PhD graduate may have a starting pay 2.5 times more than an "O" Level holder, but even when 40 years old she only has about 50% more total income.

When I put together this graph I am stunned to see how long it takes for university graduates to catch up with the earnings of an "O" Level holder who was never promoted.

It takes a long time to make up for a few years without income. I believe that Singaporean men who have to do National Service understand this very clearly.

2. Education Helps.

Despite the substantial initial outlay, the amount of money you spend on school is usually small compared to the total income you will ever make, over the course of your life. Studying more does help you make more money, but the benefits are delayed.

Also, qualifications may help open doors, but utimately it is your career skills that will make the major difference. For example, a high performing salesperson with a diploma can earn far more money than mediocre graduates at any equivalent age.

3. We Are Rather Equal.

Excluding sons and daughters of rich fucks, most salarymen and women are making roughly the same kind of money.

Despite their formal education, or lack thereof.

Therefore, I think that no one should be a cocky bastard and look down on people with less education or less money.

Until they're 32 that is.