What Effect Does Education Level Have on Wealth?

The financial benefits of higher education are frequently debated, especially with the increasing demand for skilled-workers driving up the wages of tradesmen. So does having a higher level of education result in an increased average salary?

The picture in the EU

EU flag

According to Eurostat data from 2013, the average salary for those with a high level of education (at least one year of tertiary education) in the EU was approximately 50% higher than those with a medium level of education (secondary/high-school), and a humongous 70% higher than those with only a low level of education (anything below secondary/high-school).

The basic correlation was consistent across all member states, but the highest disparity between wages by education level was in Portugal – the average hourly earnings there were three times higher than for those with a low level of education.

The trend was constant throughout the European Union and the EEA, regardless of GDP. The richest European country by capita, for example, is Luxembourg, where residents with a high level of education make almost double those with the lowest level of education. Compare this to the country with the lowest GDP per capita, Bulgaria, where the difference in wages between the least and most educated residents is just above double.Budapest

Similarly, in the Czech Republic, Hungary, and Poland, the average wage is more than twice as high for those educated to a high level.

There’s a clear correlation between education level and salary: Generally, the more educated you are, the greater your salary becomes.

The picture in the UK

London business people

Focusing on the UK specifically, reports from the Labour Force Survey in 2010 showed that the more advanced your education, the higher your salary:

 % hourly pay gap to employees with GCSE or equivalent level of education, age 22 to 64  2010   1993
 Qualification level Median hourly pay (£)  Pay gap to GCSE Median hourly pay (£) Pay gap to GCSE
 Degree  16.10  85%  10.29  95%
 Higher education  12.60  45%  8.13  54%
 A Levels  10.00  15%  6.25  18%
GCSE grades A*-C 8.68 0% 5.29 0%
 Other qualifications  8.07  -7%  4.74  -10%
No qualification 6.93 -20% 4.18 -21%

Source: Labour Force Survey, October-December 2010

Interestingly, the exact increase you can expect to receive has lowered since 1993, so while those with degrees are still earning more than those without, comparatively they’re not earning as much more as those in 1993.

The picture in the US

Washington DC with an American flag

The same pattern emerges in the US. Data from the 2015 Current Population Survey showed that the average weekly wages were:

  • Less than a high school diploma – $493
  • High school graduates – $678
  • Some college – $738
  • Associate’s degrees – $798
  • Bachelor’s degrees – $1,137
  • Master’s degrees – $1,341
  • Professional degrees – $1,730
  • Doctoral degrees – $1,623

The picture in China

Chinese yuanAccording to the 2010 Chinese General Social Survey, wages increase with every additional year of education undertaken, and 2011 data from Statista showed a similar result, while also highlighting differences in urban and rural areas:
(In Chinese Yuan)

Elementary school
Urban: 17,369
Rural: 16,848

Middle school
Urban: 18,626
Rural: 16,682

High school
Urban: 24,583
Rural: 21,640

Junior college and above:
Urban: 59,956
Rural 47,668

The picture in other developing nations

In fact, education level and employment prospects seem to correlate around the world. A study carried out by the International Labour Organization found that tertiary education in developing countries led to a higher chance of securing stable work, and earning more money.

The study, which covered Northern and Sub-Saharan Africa, Asia, Eastern Europe, Latin America and the Middle East, showed that an average of 83% of young people with university-level education had secure jobs in the 27 countries surveyed, as opposed to 40% of those with only secondary education.

African students celebrating graduation

And graduates also secured higher wages. In Nigeria, for example, those with secondary education earned an average of 3,800 Nigerian naira, those with a polytechnic qualification earned 5,300 naira and those with a university qualification earned 9133 naira.

However, none of these statistics take into account the social and financial background of those surveyed. It’s important to bear in mind that the vast majority of students accessing higher education, especially in less economically developed countries, have parents who can afford to send them and support them while they study. And it’s often the case that familial background has just as much of an effect on potential earnings as education level.

Nevertheless, the results are consistent across the board. Higher levels of education offer a better salary and quality of life, wherever you’re living.

But how much of a choice do applicants have when deciding on a degree? We look at why the arts are becoming dominated by middle class students.

2017-11-21T15:47:56+00:00

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