Overview

Over the last decade, median weekly incomes for degree-qualified adults aged 25 to 64 have, on average, been around 40% higher than those whose highest qualification was a school one. For those with a Level 4-6 tertiary qualificationLevel 4-6 tertiary qualifications include diplomas and advanced certificates below degree level that typically provide specific vocationally or trade-specific skills and credentials, e.g. NZ Certificate in Plumbing, NZ Diploma in Horticulture. the weekly income advantage has been, on average, around 23%.

When looking at just those adults who were working, the hourly earnings of those with a degree has been around 35% more than for workers with school qualifications. For those with a Level 4-6 tertiary qualification, it’s been around 10% more.

Adults with no qualifications, on average, have received 20% less in weekly income, and 12% less in hourly wages, when compared to those with school qualifications.

Median weekly incomes fell by 1.3% between June 2019 and June 2020, a direct impact of the COVID-19 pandemic. The decline was greater for those without tertiary qualifications, while for those with a degree or higher there was no decline in median weekly income. As a result, income premiums for the tertiary-qualified rose in 2020, a direct result of the differentially larger impact of COVID-19 on employment for those with lower qualifications.

The income benefits of education

Tertiary-qualified New Zealanders continue to have higher incomes than those with only a school qualification, or no qualification.  The weekly income difference for those with a degree relative to those whose highest qualification is a school one has averaged around 40% over the last decade (and was 39% in 2020).

Figure 1: Relative weekly income differences for different levels of education (2007 to 2020)

Relates to adults aged 25 to 64 whether employed or not. The graph shows the percentage difference in median weekly income between someone with a particular highest level of qualification and someone whose highest level of qualification is a school one. Prior to 2013, a combined line is shown for all tertiary qualifications below bachelors level. For any given year, differences are statistically significant (with a 95% level of confidence) for all levels except those for Level 1-3 tertiary qualifications. See ‘Notes about the data’ for further details, including on the sampling errors associated with this data.

The median weekly income advantage for those with a Level 4-6 tertiary certificate or diploma (which is typically vocationally or trades--oriented) has been, on average, around 23% since 2013 (and was 18% in 2020). Level 1-3 tertiary qualifications provide less advanced training, often oriented to specific vocational skills, and at a level equivalent on the New Zealand Qualifications Framework to upper secondary school qualifications. Many people leaving school with no qualifications choose this pathway to further their education and skills in specific vocational areas. On average, weekly incomes for people holding a Level 1-3 qualification are 13% lower than those with a school qualification, but 10% higher than those with no qualifications.

Those with no qualifications, on average, have received 20% less weekly income than someone with school qualifications.

The median weekly income for people aged 25 to 64 fell, in real terms, by 1.3% between June 2019 and June 2020, as a direct impact of the COVID-19 pandemic. The decline was greater for those without tertiary qualifications, while those with tertiary qualifications at degree-level or higher had no decline in median weekly income.  For those with no qualification, the median weekly income fell, in real terms, by 4.7%.

In contrast to the 1.3% decline between 2019 and 2020, the median weekly income, in real terms, fell by 0.8% between 2009 and 2010, and by 3.0% between 2010 and 2011, the main years New Zealand was impacted by the Global Financial Crisis.

While actual incomes tend to decrease in times of lower employment, the income advantage or premium for tertiary education tends to rise. This reflects the fact that downturns in employment typically have more impact on those with lower-level qualifications.

For example, income premiums for the tertiary-qualified rose in 2020, a direct result of the larger impact of COVID-19 on employment for those with lower qualifications. This increase in premium follows a decline in premiums in years prior to COVID-19 when the economy was growing. Some of the impacts of the COVID-19 pandemic were mitigated through a Government-provided wage subsidy that partially covered lost income during the main period of lockdown between March and June 2020. Income premiums for the tertiary-qualified have also been reduced by successive increases made to the national minimum wage, which increased in real terms by 5% in 2020, and by 25% over the last 10 years.

Wage benefits compared to income benefits

An obvious reason why education benefits incomes is because it helps you get work. No employment means no earnings and less income. Those with lower-level qualifications are less likely to be employed, and this accounts for much of the income differences shown above. But how much of a difference does tertiary education still make on what you earn once you have a job?

Figure 2 shows that the income benefits of education still remain, but the differences are smaller. Over the last decade, the median weekly income of people aged 25 to 64 with a degree has averaged around 40% more than that of those with only school qualifications. But the hourly earnings for those with a degree, who were employed, was 35% more.

A worker with a Level 4-6 tertiary certificate or diploma earned around 10% more, on average, than a worker whose highest qualification was a school one. This compares to an average weekly income difference of 23% when comparing all adults with these qualifications.

Figure 2: Median hourly earnings premium for employed people aged 25 to 64 with different levels of qualification, relative to those with school qualifications only

Relates to adults aged 25 to 64 whether employed or not. The graph shows the percentage difference in median weekly income between someone with a particular highest level of qualification and someone whose highest level of qualification is a school one. Prior to 2013, a combined line is shown for all tertiary qualifications below bachelors level. For any given year, differences are statistically significant (with a 95% level of confidence) for all levels except those for Level 1-3 tertiary qualifications. See ‘Notes about the data’ for further details, including on the sampling errors associated with this data.

For some groups, qualifications can impact more on your chances for employment than on what you will earn once you have a job. For example, those with a Level 1-3 tertiary qualification have, on average since 2013, had 10% more weekly income than those with no qualifications, but when just looking at those who were working, the hourly wages for both groups have, in real terms, been about the same.

While real median June weekly incomes overall fell between June 2019 and June 2020, real hourly earnings for those in employment did not fall. The real median hourly earnings of workers with a tertiary qualification rose between 2% and 3% in 2020. Similarly, the median hourly earnings for workers with a Level 4-6 diploma or certificate increased 6% in real terms in 2020. This, in part, may be a selection effect. Even if no one gained an increase to their wages, if those with lower hourly earnings were more likely to become unemployed, then this would act to increase the average for the group left.  The Government COVID-19 wage subsidy, as well as a 5% real increase to the national minimum wage, also helped to sustain wage rates in 2020, in particular for non-tertiary qualified groups.

Notes about the data

This report is based on or includes customised Statistics New Zealand data which is licensed by Statistics New Zealand for re-use under the Creative Commons Attribution 3.0 New Zealand licence.

1. The data used here comes from Statistics NZ, Household Labour Force Survey (HLFS) and New Zealand Income Survey (NZIS) data. The NZIS data is run as an annual supplement in the June quarter of the HLFS. The Consumers Price Index (all groups) has been used to inflation-adjust income and earnings, and the base period is the year ended June 2020.
2. Weekly income is the actual income received during the June quarter survey week. It includes income from wages and salaries, self-employment, and government transfers for all adults aged 25 to 64 whether employed or not. It does not include private transfers or income from rents and investment.
3. Hourly earnings are the usual hourly earnings from a person's main job, including where this is from self-employment, for employed people aged 25 to 64. Employed, in this context, relates to people with earnings from employment. This is smaller in scope than the official measure for employed, which also includes those who worked unpaid for relatives.
4. The qualification level groupings prior to 2013 are not completely comparable with those from 2013 onwards, due to changes made to the qualification question in the source survey in June 2013. In particular, those with a Level 1-3 or a Level 4-6 tertiary certificate or diploma can only be reported as a single group prior to 2013. Care is needed when interpreting the group with Level 1-3 tertiary qualifications shown from 2013 on. Many in this group will also hold school qualifications of an equivalent or higher level, while some will not. This limits the ability of using income comparisons between the two groups as an indicator of the income benefits of post-school Level 1-3 qualifications. In addition, definitional changes to the educational attainment question in 2013 further affect time series comparability for this group.
5. For data prior to 2009, ‘no qualification’ also includes a small percentage of survey respondents who did not state their qualification. This group typically has higher incomes than those with no qualifications.
6. School qualifications include both New Zealand and overseas school qualifications.
7. Quality of data: The statistics in this report are estimates based on sample surveys. Most official surveys are designed to produce national estimates. Where estimates are made for sub-populations, sampling errors may seriously limit the use of that information. The estimates for the sub-populations used in this report has been assessed as generally reliable for the purposes of this indicator, but readers should note that in many cases differences between Level 1-3 tertiary qualifications, and other levels of education below degree-level are not statistically significant at the 95% level of confidence. Changes in median income or earnings between years are generally also not statistically significant at the 95% level of confidence.  Non-statistically significant differences, however, can still be suggestive of genuine differences, especially where they follow a pattern that is consistently repeated over time.