Laura D‘Andrea Tyson’s recent blog in The New York Times cites some very interesting statistics regarding how “The dramatic increase in college education among women is one major reason that het earnings of female workers have increased, that the gap between male and female earnings has fallen, and that, in recent recessions, the unemployment rate for women has been lower than the rate for men.”
While obviously this trend is very positive for women in the United States, I would offer that the trend is also very positive for the country in general. From an economic perspective, any country wants to continuously increase its citizens’ overall education level, especially when that education leads directly to higher economic productivity. Higher economic productivity allows for higher wages without price inflation, as the same people are producing more goods and services.
Let’s review a quick example. If we have a company with 10 employees who work 2,000 hours per year each and can make 1 of their company’s products per hour, then the total output of the firm = 10 x 2,000 x 1, or 20,000 products. If higher education among even 2 of the employees allows those two employees to increase their productivity and make 1.5 products per hour, then the total firm output grows to 22,000 with no increase in cost. In a competitive market for workers, the company would have to pay those “higher productivity” workers more or risk losing them to a competitor firm.
Ms. Tyson goes on: “Regardless of whether the economy is in expansion or recession, the unemployment rate is considerably lower for workers with a college education than for workers with lower education attainment levels…”
So, what does this mean for you? If you already have a college education, good for you. If you have children or grandchildren considering college, or are yourself considering college, note that the difference in earnings over a lifetime for college educated workers vs. non-college educated workers is staggering.
Even if you have to borrow to pay for school, it’s generally an excellent investment. In my upcoming book we examine this though more carefully in Strategy 6. One very important item to note – public colleges and universities may be the best choice for most students from a cost / return standpoint. While Harvard and the Ivy League are fantastic institutions, the average annual cost of $53,950 may overwhelm the additional earnings you can expect over your career.
My upcoming book, Your Stronger Financial Future to be published by McGraw-Hill this September, is specifically designed to help you figure out how to save enough to retire. One major component of the ability to save is to not invade your 401K or IRA during your working years. Said another way, if you are unable to work for a period of time because you’re disabled or unemployed, you’ll essentially be spending your retirement savings prior to retirement! If you have a college education, you’ll be much less likely to be unemployed, thus you can save for retirement more easily.
So how are you or your children planning on paying for college?