Costly knowledge

For some people, university degrees are a way of "buying themselves" a high-income job but not something they actually use, says student Dan Bregmen.

The 24-year-old is pondering which is the right degree to be doing at a time when the average student loan debt is more than $15,000 and students are increasingly looking for a good return on their investment.

Research conducted by the New Zealand Union of Students' Associations (NZUSA) shows an increasing number of students are selecting courses because they will lead to a well-paid job and fewer are considering how much they will enjoy the job their course will lead to.

Many of Bregmen's friends have attended university and are now in Western Australia, "working in anything from mines to a motorcycle shop". Another has completed a music degree and is now studying law. He also studied various subjects, including psychology, English and Maori before getting halfway through a BCom and finally settling on a master of entrepreneurship degree.

More should be done to advise school leavers about their options, he says, adding he went to university because all his classmates were doing it. He sees his $40,000 of debt as no more than a "blip" given the anticipated income over the length of his working life and says earning potential did not influence him when choosing what to study.

However, the table on this page shows that the subject people study does make a significant difference to their earnings.

The figures from Statistics New Zealand show that in the 2009-10 tax year, bachelor's graduates who had studied health subjects five years earlier earned on average about $57,000, 57% more than those who studied the creative arts. Information technology, management and commerce, and engineering and related technologies were next in the income stakes.

Gender differences emerged as well. Across the fields, men earned about 18% more than women. The difference in health ($75,630 for men, $52,450 for women) was expected given the disparate areas graduates can go into - nursing, for instance, is dominated by females. But the gap is also noticeable in areas such as management and commerce ($56,540 for men, $46,220 for women) and in information technology ($55,780 for men, $48,960 for women).

The overall findings were not too dissimilar to those in a Statistics New Zealand/Ministry of Education report published in 2009 that looked at a group of 30,000 young people last enrolled at a tertiary education institution in 2003.

Three years after studying, bachelor's degree graduates who had specialised in medical studies had the highest earnings premium, making 2.59 times more than people who had studied humanities. Other high-earning fields, compared with humanities, were veterinary studies (1.61 times more), law (1.47), electrical engineering (1.44), pharmacy (1.43), accountancy (1.42) and computer science (1.36).

Science degrees earned between 1.22 and 1.30 times more (except biology, where the premium was smaller). Graduates in teaching earned 1.27 times more in the first year, but this had dropped to 1.16 times by the third year. Those in tourism, the performing arts, visual arts, or graphic and design arts earned between 10 and 20% less than people who had studied humanities. However, communication and media graduates earned 11% more.

Across other levels of study, qualifications in engineering, information technology, architecture and building, and health generally earned the most.

The main reasons for choosing a particular course still tend to centre on personal interest and enjoyment, either in the course itself or in future career prospects, says NZUSA co-president David Do.

But about half of all students say one reason for taking their course is because they believe it will lead to a well-paid job. These people were more likely than average to be studying commerce, business or finance (70% of respondents), computer science or electronics (64%), engineering (70%), law (70%), medicine (67%) and nursing (55%).

Rising fees and rising student debt mean students' decisions are not necessarily consistent with their interests or the areas they actually want to be in, he says. As a result, lower-paid but important vocations such as nursing, teaching and science may lose out.

The average student loan debt is now $15,558, 31% higher than in 2001, according to the NZUSA's recent survey that quizzed 2850 students from 17 tertiary institutions across the country.

It found students were hard hit by the economic recession, with fewer jobs and greater expenses meaning many struggled to make ends meet.

Median weekly expenses for food ($50), transport ($30), entertainment ($30), personal items ($10) and general bills ($20) remained consistent with the last survey in 2007, but median accommodation costs increased slightly to $115.

More than three quarters of those surveyed relied on a student loan to pay tuition fees, and one in every four students cited fees as having an influence on their choice of course. Average tuition fees now stand at $6246, an increase of more than 48% since 2001.

So is the cost of an education worth it, given that a police recruit, for example, will earn more than $900 net a fortnight while at college and a gross salary of almost $54,000 upon graduation 19 weeks later?

The answer is "yes", if you take the study that looked at 30,000 young people. It showed that three years post-study, those completing a bachelor's degree earned more than 40% more than the national median and those with postgraduate qualifications, 60% more. They might not be earning more than a police officer, but they'll still be better off than they would be without the qualification.

Dr David Clark, who spent nine months in Treasury looking at the tertiary education sector, says research shows people often overestimate the cost of a degree and underestimate the benefits.

Many people of 40 or 50 who have never done a degree are capable but struggle to get to the next layer of job options.

"It's commonsense. If it was all about how much money you'd make and you had the option of doing a degree, it's one of the best investments you can make," Dr Clark says.

And for some people, one stint at university is not enough.

Dentist Mike Smith has given up a successful career in the United Kingdom to return to study.

Smith (43), had worked in the UK since graduating from Otago in 1989 and had his own practice in Suffolk for five years.

The decision to return to Dunedin for a three-year doctor of clinical dentistry degree was a tough one and probably quite stupid, he says, laughing.

"I've got three kids and a wife and we had a great life. And now we have no money ... and are just getting more and more in debt each day."

Although someone with his qualifications will be in demand, the extra he will earn as a specialist will in no way recompense him for his lost earnings, his living expenses and his tuition fees of $25,000 a year.

His main reason for further study was to extend himself and to do something different without actually switching career. Specialising in gum disease and gum surgery, he plans to return to his practice next year.

While he owed $25,000 at the end of his first degree, today's undergraduates can easily incur debts of $100,000 and would be "crazy" to do so without expecting to cover those costs during their career.

"But I don't think for dentistry, at least, it's ever been a major concern - being able to get a return on your investment - because it's always been well-paid."

What increasing debt levels have done is "concentrated the minds of some people who might not have been so interested in money and maybe done more socially-orientated dentistry", he says.

The single biggest decision graduates have to make is whether they can afford to remain in New Zealand, where jobs are not as well paid.

"A lot of them go to Australia ... where you're probably 40% to 60% better off in straight dollar terms."

Earnings potential was not a consideration for Chris Stoddart when he embarked on his bachelor of arts (hons) degree, majoring in philosophy. He'd simply read some philosophers in school and was interested in life's big questions.

"It's fine to do more vocationally-focused things. In fact, if I was approaching uni now - looking at all the costs now - I'd definitely be thinking about vocational training," he says, adding he would probably combine philosophy with something like economics.

"But it's like your job - you've got to be doing something you actually enjoy [given] you spend so much time on it."

The manager of the University of Otago's doctoral and scholarship office, he has sometimes joked that with a BA in philosophy, one could be philosophical about being unemployed. But the reality is he had little problem finding a job when he graduated in 2002 and has never been out of work for long, except by choice.

"I guess someone who's successful with a commerce degree is going to earn more than me but I'm doing OK."

One of the good things about doing an arts degree is the opportunity to try a few different papers and find one's niche, unlike a doctor who has a prescribed programme right from the start, he says.

"And university can be about training you to think as much as anything ... Philosophy in particular does that."

But what on earth do graduates with a philosophy degree do these days? Almost anything, according to Dr James Maclaurin, head of the university's philosophy department.

He produces a list of famous philosophy majors that includes former presidents (Bill Clinton, Pierre Trudeau), comedians (Ricky Gervais, Steve Martin) and business high-flyers (the founders or chief executives of Wikipedia, Hewlett-Packard, Flickr and Morgan Stanley).

People who don't know what philosophy is often see it as "very much an optional extra", Dr Maclaurin says.

But graduates are increasingly sought-after by employers for their analytical skills, their critical thinking and their ability to look for different approaches. And students - often combining the subject with science, law or commerce - are just as likely to be debating modern issues such as war, climate change and technology as studying classical texts.

"A lot of our students have traditionally gone into things like the diplomatic corps or Treasury or various governmental ministries ... But increasingly business people are realising that they need more than accountancy. Lehman Brothers went down not because the accountants got it wrong but because the overarching philosophy of the bank was wrong.

"A lot of business enterprises are realising that a bit of breadth, a bit of history, a bit of philosophy, a bit of something else, will help them ensure against everyone just marching in the same direction and not questioning what's going on."

Dr Maclaurin has noticed another trend: "When times are tough, you'd think people would think, 'I'm going to be a surveyor or a doctor or an accountant. But quite a lot of people who are coming back [to university] ... are thinking, 'I'm going to have a year or two where I might not be working. I'll go back and do what I always wanted to do ...

"So there's a whole lot of people signing up for English literature, philosophy, classics, politics and things like that, to broaden themselves out and [to ensure] they don't look like all the other people who are applying for jobs."

Having a degree full of A grades makes someone "very employable" across a range of disciplines but is difficult to achieve if they don't much like the subject, he adds.

Jackie Dean, manager of the careers development centre at the university, agrees. Some jobs might have high kudos and high earnings potential but if a student does not have an interest or a strength in that area, it will be hard for them to sustain full-time study.

The university's "Otago Choice" programme (at, helps match people's skills and interests with the 106 bachelor-level subjects on offer.

Dean also urges students to use the career development centre from the start of their time at university, not just in their final year, and to take advantage of the opportunities provided by part-time work, internships, voluntary experience and visits by graduate employers.

If anyone is a poster boy for doing a BA, it would be Dr David Clark, the Labour candidate selected to stand for the Dunedin North electorate at this year's general election.

Dr Clark, now warden of Selwyn College, studied subjects that interested him but did them well and saw doors open as a result.

After completing a BA in German language and literature and a bachelor of theology (hons), he worked as a Presbyterian minister, then returned to university to do a PhD focusing on existentialist thought. He later spent three years at Treasury, despite having no economic training.

Dr Clark says the organisation was willing to look outside the usual accounting sphere if an applicant had a postgraduate degree and a good academic record.

"It's a set of skills which is the important thing. People move about in different careers and the actual subject matter, in some ways, is not that important. It's the ability to think, to follow through rational processes and to work independently that are highly valued by a lot of employers ..."

"They want people with top degrees and it doesn't matter in what field ... because every field is so different anyway that you're going to require further training through your career."



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