The income benefits of tertiary education

Tertiary-qualified people get a noticeable earnings advantage compared with those without a tertiary qualification

Weekly incomes for tertiary-qualified adults with a degree are, on average, at least 30% higher than those of adults whose highest qualification is a school one. For those with a Level 4-6 tertiary qualification, the weekly income advantage is 14%.

When comparing only those people who are working, the hourly earnings of those with a degree is still 30% more than for workers with school qualifications. For those with a Level 4-6 tertiary qualification, it’s 7% more.

Weekly incomes for tertiary-qualified are higher now, in real terms, than they were in 2007. Hourly earnings are too. All of the growth in hourly earnings occurred during the immediate post-GFC recovery period, and from around 2015 real hourly earnings have remained roughly the same. By contrast, median weekly incomes for the tertiary-qualified population have continued to increase. This largely reflects the stronger labour market in recent years, and higher levels of employment in the population

Indicator description

Median weekly income of employed and non-employed adults received during the survey week from wages and salaries, self-employment, and government transfers.

Median hourly earnings of employed adults from a person's main job, including where this is from self-employment.

All measures are for adults aged 25 to 64. This covers the population who are likely to have completed their initial school and tertiary education and less likely to have retired.

The income or earnings premium is the additional income or earnings received by people with a tertiary education qualification as a percentage of the income or earnings of those whose highest qualification is a school one.

‘Real’ income or earnings means that the value has been adjusted for inflation.

Real weekly incomes for qualified adults up in recent years

Tertiary-qualified New Zealanders continue to have higher income than those with only a school qualification, or no qualification.

After declining during the period of the Global Financial Crisis (2007-2009), weekly incomes have been increasing, even after adjusting for inflation. The median real weekly income of people with a bachelors or higher qualification in 2019 was $1,151, 3% higher than it was in 2007. The weekly income for adults with a Level 4-6 tertiary certificate or diploma was $1,000, up 8% from 2007. Most of this growth has occurred since 2015, a period during which New Zealand has seen a relatively strong labour market.

Real median weekly incomes for those whose highest qualification is a school one have increased 15%, from $768 in 2007 to $880 in 2019. Weekly incomes for people with no qualifications also increased 15% over this period, from $613 in 2007 to $706 in 2019, with much of this increase occurring in the last two years.

Figure 1: Real median weekly income for the population aged 25 to 64 by highest qualification (in 2019 dollars)

Refer to the  for notes on this graph.

The income benefits for tertiary-qualified

Benefits or premiums are often expressed as the difference in what one group earns compared with another. Figure 2 shows the median weekly income premium for people with a tertiary qualification relative to someone whose highest qualification was a school one.

Figure 2: Median weekly income premium for the population aged 25 to 64 by highest qualification, relative to those whose highest qualification is a school one
Figure 2

Refer to the  for notes on this graph.

The weekly income premium of those with a degree relative to those whose highest qualification is a school one has consistently been above 30%. The median weekly income advantage for those with a tertiary certificate or diploma (at Level 4-6) have ranged between 9% and 32% since 2007, and sat at 14% in 2019. Those with no qualifications, on average, received 20% less weekly income than someone with school qualifications.

Weekly income premiums have been decreasing in recent years. This is likely to reflect the recent stronger labour market which has benefitted employment and earnings for less qualified. Changes in the premium also in part reflect successive increases made to the national minimum wage, which has increased in real terms by 15% in the last 10 years, and over 50% in the last 20 years.

Hourly earnings for tertiary-qualified are also up

An obvious reason why education influences earnings is because it helps you get a job. Those with no or low qualifications are less likely to be employed and this is a key factor in the weekly income premiums shown above. But once you have a job, how much of a difference does education still make? In this section, we look at employed adults only, and what they earn for different levels of qualification.

Figure 3: Real median hourly earnings for employed adults aged 25 to 64 by highest qualification (in 2019 dollars)
Figure 3

Refer to the  for notes on this graph.

Real median hourly earnings of workers across all levels of qualification were higher in 2019 than they were in 2007.

The median hourly earnings of workers with a bachelors or higher qualification were $32.60 in 2019, around 5% higher in real terms, than they were in 2007. Similarly, the median hourly earnings for workers with a Level 4 to 6 diploma or certificate increased 6% in real terms, to $26.90 in 2019.

Median real hourly earnings have grown at a faster rate for workers whose highest qualification is only a school one, or who have no qualifications.  Median real hourly earnings increased 8% to $25.00 for workers with a school qualification as their highest, and by 18% to $22.00, for workers with no qualification. To a large extent, this reflects successive increases in the national minimum wage, which has increased around 20% in real terms, between 2007 and 2019, and which disproportionately benefits less qualified workers.

While hourly earnings premiums are lower

As Figure 4 demonstrates, the premiums for having a tertiary qualification become smaller when looking only at people in work. For example, over the period 2007 to 2019, the hourly wage premium for workers with a degree or higher was, on average, 10% lower than their premium for weekly income.

For those with a tertiary certificate or diploma (Level 4-6), the difference between weekly income premium and hourly earnings premiums is even more sensitive to employment effects. Adults with a tertiary certificate or diploma got 14% more weekly income in 2019 than those with school qualifications. When looking at workers only, the hourly earnings premium was 7%.

Figure 4: Median hourly earnings premium for employed adults aged 25 to 64 years by highest qualification relative to those whose highest qualification is a school one

Figure 4

Refer to the  for notes on this graph.

Furthermore, these premiums have been reducing in recent years. In 2019, the median hourly earnings premium for workers with a degree was similar to the weekly income premium for all adults with a degree, at 31%, and continuing a downward trend since 2014. This reflects higher real wage growth and levels of employment since 2014 among those with only school qualifications.

Footnotes

  1. The median is the middle of a sorted list of numbers.
  2. Weekly income is the actual income received during the survey week from wages and salaries, self-employment, and government transfers for all adults aged 25 to 64. It does not include private transfers and investment income.
  3. Hourly earnings is the usual hourly earnings from a person's main job, including where this is from self-employment for employed people aged 25 to 64.
  4. The Consumers Price Index (all groups) has been used to inflation adjust earnings and the base period is the year ended June 2019.
  5. Qualification level data prior to 2013 is not completely comparable with that from 2013 due to changes made to the qualification question in the source survey in 2013.
  6. For data prior to 2009, ‘no qualification’ also includes people who did not state their qualification.
  7. School qualifications include year 11, 12 and 13, and overseas school qualifications.
  8. Post-school Level 1-3 qualifications are not shown. Many in this group will also hold school qualifications of an equivalent or higher level, while many 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, definition changes to the educational attainment question in 2013 particularly affected time series comparability for this group.
  9. Source:  Statistics New Zealand: New Zealand Income Survey (to 2015), Household Labour Force Survey (from 2016), and Consumers Price Index.

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