Who wants a degree? People who want to earn more…

Who wants a degree? People who want to earn more…

New Zealanders with degrees are doing well according to the OECD’s Education at a Glance 2012 report – and contrary to recent media reporting.

The OECD report shows that annual earnings in all OECD countries increase with levels of educational achievement, and that New Zealand degree graduates earn, on average, about 50% more than those with only upper secondary and/or post-secondary qualifications.

It should be noted that approximately 40% of working age New Zealanders with tertiary qualifications do not have a degree; rather they hold lower-level qualifications (mainly, diplomas or certificates), which according to the OECD report give little annual income benefit.

Even so, the OECD calculates a positive net financial return to the average New Zealand tertiary graduate (degree or diploma etc) after taking into account years of forgone income during study, direct costs of study, and income tax effects.

While the annual earnings premium for New Zealanders with degrees is significant, it is not amongst the highest in the OECD group by any means. However, it is similar to the annual earnings premium for degree graduates in Australia, Denmark, Belgium, Sweden, Japan, Switzerland, Korea, Netherlands and Norway.

Reasons for New Zealand’s lower average earnings premium compared with many of the other OECD countries include:

· Traditionally good outcomes for those with non-tertiary qualifications – levels of employment for this group are amongst the highest in the OECD.

· A low wage economy.

· A narrowly spread wage profile.

The OECD report makes the general remark that:

“The supply of highly-educated workers has increased rapidly in most OECD countries over the past several decades. Other indicators in Education at a Glance suggest that there is little evidence that this expansion has led to an excess supply; on the contrary, most indicators suggest that the expansion of higher education has not kept pace with the demand for those skills. As a result, there is a widening gap in employment prospects among individuals with different levels of education and increasing earnings differentials in most countries.”

The question for New Zealand then is not whether we need more degree graduates coming into the workforce but rather how can we improve graduates’ incomes to keep them in New Zealand against the attractions of higher income returns elsewhere?

ENDS

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