The Effect a Post-Secondary Education Can Have on Your Salary

The average cost of attaining a post-secondary education in Singapore has risen at staggering rate of 38% since 2007, which is 10% faster than general inflation. Despite this trend, education continues to be one of the biggest spending areas for Singaporean families: according to the government's Household Expenditure Survey, families spent over S$1 Billion alone in 2014 on post-secondary education costs.

With education costs rising, many students and their families have opt to getting education loans to finance their studies. In the mean time, some people may wonder if a university education will have a lasting, positive effect on lifelong earnings. Our study here on the effect of post-secondary education on income suggests that the "right type" of education is still a worthy investment.

Current Economy

Although receiving a higher education is seen as a stepping stone to increased income, successful employment and career advancement, current economic conditions in Singapore have shown that simply having a post-secondary degree will not guarantee significant earnings or even a job after graduation. The current rates of unemployment and inflation in Singapore have played a major role in the ability of recent graduates and others in the workforce to earn money. Many graduates have also found themselves underemployed or even working in a field unrelated to their degree programs.

According to the most recent Manpower of Ministry (MOM) unemployment report, unemployment in Singapore has risen slightly from 2.8% in 2015 to 3.0% in 2016. The Labour Market Development report release in 2016 concluded that workers who possessed secondary and degree qualifications were the most heavily affected by unemployment. In January, the Ministry also reported that the annual average resident long-term unemployment rose from 0.6% in 2015 to 0.8% in 2016. Not only that, the figures reported were higher for degree holding individuals.

However, figures do indicate that people with higher education earn significantly more than people without post-secondary education. According to the Ministry of Manpower, workers with post-secondary education earn almost double what people with lower degrees earn: the average monthly wage was only S$2,800 for non-degreed workers vs S$5,800 for workers with post-secondary degrees (including CPF contribution). With a difference of more than S$3,000 a month, the difference in income can easily be upwards of S$36,000 per year. Given that a university's tuition is around S$8,000 to S$10,000, it means that less than 2 years or so of work can easily close the gap in tuition.

Median Monthly Salary (With CPF Contribution)20162017% Chg
Primary & Below1,7551,747-0.5%
Lower Secondary2,1552,2142.7%
Post-Secondary (Non-Tertiary)3,0423,028-0.5%
Diploma & Professional Qualification4,0954,3095.2%

Earnings Impact by Degree Type/No Degree

Not only that, having the right type of degree could help you boost your income meaningfully. Singaporeans have a variety of post-secondary educational options. Some of these options include attending the Institute of Technical Education, Polytechnics schools, and Universities. The effect on one's monthly earning potential will vary significantly depending on the type of degree obtained. For example, university degrees earn the most with an average monthly income of $3,360 vs S$2,180 earned by workers with more technical degrees (without CPF contributions).

Median Gross Monthly Salary by Degree Type201120122013201420152016
Institute of Technical Education1,3001,3501,4101,5001,7001,655

Parting Thoughts

Although current economic conditions and reports show that the wage gap between degreed and non-degreed workers is closing, median lifetime earnings will be significantly higher for residents with higher educational qualifications. Workers who earn a Bachelor's degree are expected to make over their lifetime almost double what someone who does not have a degree or higher education will make.

The occupation that a degree holder works in also plays a part in their earnings potential. According to a recent study by the Georgetown Center on Education and Workforce, nearly 40% of workers who have a Bachelors' degree are expected to earn more than workers who have a Master's degree because of their occupation; this means that you won't earn more just because you have a higher degree. To do well professionally, you have to choose a job that you enjoy and excel at.

A college degree or certification offers many other non-monetary benefits. The support network of friends can help you succeed and maintain your professional standing over the long run. In addition, having a post-secondary education provides a variety of other indirect financial benefits by increasing their credit scores (i.e. less need to keep borrowing & higher ability to repay their debt) and help reduce the cost of buying a home or a car by granting them lower interest rates.

Choosing to further one's education is an important decision. Sure, income has been increasing more rapidly for people without post-secondary education, but evidence is still overwhelmingly in favor of pursuing a post secondary education at a university.

Duckju Kang

Duckju (DJ) is the founder and CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting and investing. He previously worked at hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics with honors, Magna Cum Laude. His work has been featured on major international media such as CNBC, Bloomberg, CNN, the Straits Times, Today and more.