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Academy diploma is worth more than half of million PLN net [CINKCIARZ.PL ANALYSIS]

Most people in the world know that higher education guarantees higher earnings. However, to what degree would your financial situation improve, if you decide to study few more years? Marcin Lipka, Cinkciarz.pl analyst, knows the answer to this question.

Marcin Lipka, Analityk Cinkciarz.pl

According to the OECD data, the level of education has an impact on many life aspects. Statistics show that people with higher education have less problems in finding a job and earn more. Moreover, they are healthier and more willing to become involved in voluntary work. They also have more trust towards others.

On the other hand, extending your education by a few years increases its costs. People who decide to study at the university, very often start their full-time jobs later than their peers, who chose a different career path. So is academy diploma really a passage to financial success?

It's easier finding a job

According to the Polish Central Statistical Office study regarding economic activity of Polish citizens from the first quarter of 2016, the unemployment rate among people with higher education is at the level of 3.4%. In the case of people who finished their education in junior high or sooner, it was at the 16.4% level. The data was measured with BAEL method.

However, it's worth keeping in mind that when you have made a decision about starting the studies, you should finish them. People who have a vocational secondary education or post-secondary education, have it easier when it comes to finding a job than people with secondary education. The unemployment rate in the first two cases is at the level of 6.1% and 7.5%, respectively. When it comes to the third case, it's at the level of 10.6%.

Moreover, if we look at the employment index against population in working age (people who are older than 15 years), it's definitely higher among people with higher education (77.5%) than in other groups, where its between 14.1% (lower secondary and elementary) and 61% (vocational secondary).

The above statistics are very similar in the OECD countries. The unemployment level among people with higher education is at the 4.5% level (master degree), whereas it's at the 14.8% level among people with lower secondary or elementary education.

How much is academy diploma worth?

In its analysis entitled „Education at a Glance”, the OECD presents costs and profits of continuing education. The document analyzes financial aspects of different lengths of education. These days, however, it's most crucial to compare salaries of people with higher education to salaries of people with post-secondary or vocational secondary education.

It's also worth noting the calculations have been conducted with the use of USD PPP unit (purchasing power parity). This provides us with information on how would the educational differences in particular countries increase the real possibilities of purchasing goods and services, in the case of living in the United States. This value can be converted to the local currency. In the case of Poland, each 1 USD PPP is approximately 50 cents, which gives 2 PLN.

The average cost of education in the OECD countries is 13.2k USD PPP. This also requires adding the cost of lost earnings at the level of 43.5k USD PPP. Therefore, we are more than 55k USD PPP behind after finishing studies. Calculations for the median in twenty-one countries of the European Union were very similar. However, the average life-time earnings of the OECD countries citizens with higher education are by 405k USD PPP (men – 477k, women – 332k) more than those who didn't go to studies. This amount should be decreased by the tax effect, as well as social contributions. As a result, taking into consideration costs of education, as well as earnings lost at the beginning, the profit is still at the level of approximately 187k USD PPP net (men – 299k, women – 145k).

However, we have to take note that education-related financial profits are significantly different in particular countries. For example, in South Korea or New Zealand it's only 72k and 92k USD PPP, respectively. Profits from a long-term education are relatively low in Spain – slightly more than 115k USD PPP (in the case of women it's 30k more than in the case of men). The value of academy diploma in Germany, as well as in Holland is near the OECD average level (160k USD PPP and 197k USD PPP, respectively). Education is most profitable in the United States (366k USD) and in Chile (400k USD PPP). How is it in Poland?

Higher education gives a profit of more than half of million PLN net

The average direct cost of studies in Poland is at the level of 6k USD PPP. We also need to add the lost earnings at the level of 18k USD PPP. However, this is not a large amount taking into consideration that higher education allows you to earn approximately 400k USD PPP gross more during your career, than people who didn't go to studies.

Just as in the case of other OECD countries, we need to reduce the above result by the effect of higher taxes (36k USD PPP) and social contributions (72k USD PPP). Therefore, your net profit is 274k USD PPP (men – 338k, women – 210k). If we convert this amount to the Polish currency in consistency with the rule that we have presented before, we may estimate that the average net value of academy diploma in Poland is slightly more than 500k PLN.

Similar values are observed in other countries of our region. In Hungary it's 227k USD PPP and in Czech Republic its 230k USD PPP. We also need to emphasize that the value of academic diploma in Poland is the third highest among all countries that have been surveyed by OECD.

In conclusion, taking into consideration the used simplifications that pub all diplomas into one bag and extract an average result, the profits of having a higher education are indisputable. This is because they are also observed in countries with a longer history of the market economy. Therefore, it's possible that in a few years from now this theory will still be valid.

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