Few of us would argue with the notion that getting a university education can be a very lucrative thing – both intellectually and financially. But, obviously, not every degree. And not every university.
Recent data from Statistics Canada quantified the benefit of a Canadian undergraduate degree over a high-school diploma, in terms of average additional earnings over a 20-year period (1991 to 2010): Adjusted for inflation, it's $732,000 (75 per cent) more for men and $448,000 (85 per cent) more for women. Looks like all those late nights of studying and drinking games were worth it, right?
Well, maybe. Consider that the average cost of four-year tuition, residence accommodations and other expenses was about $71,000 in 2010. On top of that, there's the opportunity cost of having not worked for four years; let's take $44,000 a year, the study's average for a 35-year-old man with a high-school diploma, which makes another $176,000. What if you took the combined total, $247,000, and simply invested it for 20 years at a fairly reasonable 6-per-cent interest rate? A handy compound-interest calculator tells us you would end up with $792,000.
Granted, that's a fairly crude back-of-the-envelope calculation; for one thing, the immediate high-school graduate would more likely be working at closer to minimum wage than the 35-year-old's average. (Though he might also be four years further up the corporate ladder than his university counterpart.)
Still, the Economist magazine reported this week on a study that reached a similar conclusion: Despite higher earnings (on average, $17,500 [U.S.] a year) of U.S. university graduates over their high-school-diploma peers, many would have been better off financially if they had forgone university and started working at age 18.
The study found, not all that surprisingly, that some degrees generated better long-term returns than others – even if their upfront tuition costs were considerably more. Many liberal arts degrees, for example, produced lower returns than if their holders had simply not bothered, and plunked their money into government bonds instead.
Interestingly, the choice of university was also a major factor in long-term returns, regardless of the field of study. Prestigious schools such as Harvard and Stanford generate annual returns in the 15-per-cent range for their degree holders. But small, little-known universities such as Fayetteville State and Shaw University actually generate negative returns on students' educational investment.
The high bar for female economics majors
When Janet Yellen took over earlier this year as chair of the Federal Reserve – quite possibly the most powerful economics job in the world – Canadian economist Sherry Cooper wrote a commentary for Economy Lab detailing the still-slow advancement of women in the field of economics. She noted, among other things, that economics is second only to engineering for the lowest proportions of female PhDs.
Justin Wolfers, an economics professor at the University of Michigan and a senior fellow at the Brookings Institution, a Washington think tank, recently posted a curious chart on Twitter regarding women studying economics in university. The chart indicates that for students receiving "A" grades in economics courses, women are actually slightly more likely than men to pursue economics degrees. But when the grade drops to a still-respectable "B," women drop away: They are 40 per cent less likely to major in the field than men at the "B" level.
Blasting your way to economic simulation
Given the huge money in the video game industry, it probably shouldn't be a big surprise that game makers have discovered the value in consulting with economists. But can economists learn something from video games? Apparently, yes.
I recently stumbled upon this article from the Financial Times, talking about how the internal world of a video game can act as a virtual economy unto itself – especially now that many games use points systems that can be accumulated and traded like money, to acquire skills and abilities within the game, and even in other games. First it was the game companies that started hiring economists to help them design these game economies; but now, the economists themselves are seeing the games as valuable economic simulation tools. As Indiana University professor Edward Castronova said: "In a generation, we'll have lots of professors running little games … to learn about tax policy, labour markets and international trade."