With my oldest finishing up her first year at the university, I started thinking about the alchemy of converting human capital (i.e. W-2, 1099-contracting, etc.) into investment capital. As I worked out a post, I started looking into the effect of college on increasing one’s human capital.
Entering the Workforce
Many people get jobs during high school. Growing up, I had a paper route just months before I turned 10 years old. When I was thirteen, I partnered with my older brother in a window washing business, canvassing neighborhoods in our small town, giving bids and washing windows. While the money was generally good, it also made me hate door-to-door selling.
When I turned sixteen, I got my first “real” job, a.k.a. a job that came with a W-2 and FICA taxes. I was an evening janitor at the elementary school near my house and during the summers I worked on the school district’s carpet shampooing crew. While there, I met several “lifers”, people who had worked at the local steel mill until it was shuttered, transitioning to full-time janitorial work. By the end of my first summer, I had added another career onto my “never again” list.
Using data from the Bureau of Labor Statistics, in 2017, someone with a high school diploma could expect a median income of $35k. Assuming our grad starts work at age 18 and retires at 65, with an average 2% wage increase each year that keeps track with inflation, total gross lifetime earnings comes to $1.7 million.
I never planned on stopping at high school. Nor would I have been satisfied with an associates degree. However, for many, this is a fine destination.
- Enter the workforce two years later than a high school graduate.
- Tuition: $3,570/year at a local, public community college. Data from here.
- Unemployment at 3.4%
Median income: $42/k year, $1.9 million lifetime earnings
Nearly $200k is not a bad trade for cheap public community college and forgoing two years worth of earnings.
But what about the late bloomer that works for a few years, then decides to get their associate degree? How late is too late? If you quit work at 51 to go get your associate’s degree, the two years of lost income and tuition payments would make it hard to break even. That’s surprisingly late.
Let’s move up the rungs to a bachelor’s degree.
- Enter the workforce four years later than a high school graduate.
- Tuition: $8,230/year, in-state at a public university
- Unemployment at 2.5%
Median income: $59/k year, $2.5 million lifetime earnings
The jump between an associate’s degree and a bachelor’s is even bigger: $640k is not a bad trade for another two years of school.
And the late bloomer high school student, who works for a few years, then decides to get their bachelor’s degree? How late is too late? It’s actually later than our associate degree, with the cut off at 53. Again, surprisingly late.
Let’s move up the rungs to a master’s degree.
- Enter the workforce six years later than a high school graduate.
- Tuition: $8,670/year, in-state at a public university
- Unemployment at 2.2%
Median income: $71/k year, $2.9 million lifetime earnings
The jump between a bachelor’s degree and a master’s degree is more modest at $340k. Again, not a bad tradeoff for two more years.
Interestingly enough, the late-blooming high school graduate isn’t as favored here, with a cutoff at 50 years old.
How about going on to be a doctor or lawyer? Things are a little more murky here, with tuition varying widely. I’m going with the following assumptions:
- Enter the workforce nine years later than a high school graduate.
- Tuition: $22,387/year
- Unemployment at 1.5%
Median income: $95/k year, $3.4 million lifetime earnings
Yes, I’ve made some huge, gross assumptions here. Not all degrees, tuitions, or situations are the same. However, with all of its imperfections and focus on medians, I think this post still shows the value of education.
What level of education do you have? Anything I’m not considering that I should? I’d love to hear about it in the comments.
 Actually, the BLS number is $37k but I multiplied it by the unemployment rate of 4.6% to get $35k. I’ve done the same thing for all of the numbers. For those who don’t finish their high school degree, they can expect a median salary of $26k, which factors in 6.5% rate of unemployment. That’s only $1.2 million life earnings. Stay in school, kids!
 Here’s the spreadsheet if you want to understand my analysis.