Does studying improve your salary? | Economipedia

Studies, as we all know, occupy an important place in our lives, much more so now that education is becoming more and more accessible throughout the world. Not only because they influence the direction we can take in our professional career, but also because they can also enrich us on a personal level. However, no one ignores that studying involves a large investment of time, money and effort, in exchange for benefits that are not always certain.

Therefore, in this article we will try to answer the million dollar question: is it worth studying? Will my standard of living improve if I invest in my education?

The benefits of education

Not all the advantages of studying are quantifiable

The first thing we must point out is that, as we have previously mentioned, the benefits of studying are not limited to the workplace. To the extent that education allows us to increase our culture and helps us better understand the world around us, our personal growth can be enhanced by it.

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In this article, however, we will focus on the quantifiable benefits of studying. In other words, we will see if it is true that a higher level of education allows us to obtain a higher salary in the labor market, or if it is just a myth.

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What do salaries depend on?

To increase our salary, we must choose studies that really enhance our abilities in the workplace

If what we are looking for is a good salary, let’s see what economic science tells us on the subject. A priori, the salary is the compensation that an employee receives from his employer, in exchange for his work. Naturally, this consideration can never be greater than the value that the worker brings to the company, because then it will not be profitable to hire him.

The reference variable is the Income from the Marginal Product of labor, an estimate of how much the last contracted labor unit contributes to the company. This variable determines the demand for work, that is, the amount that the employer will be willing to pay us.

That means that when we go to an interview, the salary that they can offer us is hardly going to exceed what our employer estimates that we can contribute. The good news is that studying often increases our abilities and allows us to add more value to our work. In a way, it is as if we push up that implicit restriction on our salary.

Now, let’s not forget that for that to happen, our studies really need to enhance our abilities. In other words, the knowledge we acquire is related to our job and helps us achieve better performance. For this reason, it is important to choose well what we are going to study, since the simple fact of having a degree does not guarantee that we will work better.

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Other factors to consider

The sectoral situation, the labor market and regulations can also influence what we are paid for our work

On the other hand, even if our actual capabilities improve, we are also not guaranteed to charge more. In the first place, because the situation in the sector has a great impact on wages.

Let us think, for example, of a recently graduated architect who is looking for work in a context of a real estate bubble, where house prices do not stop rising. In that case, the salaries will tend to be better, because the income of the construction companies for each house that the architect can design will be very high.

Now, if that same person, with the same education, went out looking for a job while house prices are falling, it will be much more difficult to get a good salary. Simply, because in this context it will no longer be profitable to pay good salaries, and therefore employers will not be willing to pay as much as in the rising phase of the bubble.

Another factor that influences is the labor supply, that is, the number of people who will be willing to do a job for a given salary. The abundance of available labor generally puts downward pressure on wages, while where there is a shortage of workers they tend to pay better wages.

For this reason, it may happen that in a low-skilled job that nobody wants to do, they end up paying better salaries than in another where studies are lacking, but there are plenty of candidates.

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Finally, there are also external factors that influence wages. In many sectors, state regulation or union agreements play an important role. In others, there are even quota or license systems (as in the case of doctors) that artificially restrict the entry of new workers and thus keep wages high.

Is it profitable to study?

There is a positive correlation between educational level and wages, although it is a general trend that does not apply to all particular cases

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That said, the evidence shows that, in general, studying does improve our salary. Or at least, it is the case of most Spanish-speaking countries, as we can see in the graph.

The most paradigmatic case is Mexico, where people with higher education earn, on average, more than 9 times what workers with no education earn. Colombia and Chile follow in the ranking, with a large difference in income level between the most and least educated population in the country. Therefore, we can say that in these countries, studying and training is especially profitable.

On the other side we have Cuba, Spain and Bolivia. Regarding the Caribbean island, we can only say that, since a large part of the labor force is employed in sectors regulated by the State, it is difficult to take wages as a market price, since they are established by the political authorities.

Spain, for its part, has an economy with serious imbalances between the educational offer and the needs of the labor market. These deficiencies give rise to qualified but poorly paid jobs, which lowers the average and offsets the effect of the better paid professions. Something similar occurs in Bolivia, beyond the difference between the labor markets of both countries.

The role of financial education

It is not about the fact of acquiring knowledge, but about having tools to make better decisions

On the other hand, there is also a branch of studies that, although it may not be linked to our work, usually benefits us financially. It’s about financial education.

In this case, the goal is not just to accumulate theoretical knowledge. On the contrary, it is an instrument to help us make better decisions. Some of which, incidentally, involve our professional career.

Let’s imagine that we have the possibility of changing jobs and we are analyzing the conditions of a job offer. With a basic financial education, we can understand how issues such as agreements, taxes, bonuses, etc. affect us on the final salary.

Thanks to this, we will be able to have a clearer idea of ​​how a job offer can be translated into specific conditions. Which, in turn, helps us make better decisions in our working lives.

The importance of training

Although studying does not always improve our salary, under certain conditions it greatly increases the chances of this happening

In conclusion, we can say that dedicating time and money to training is a good investment. Even knowing that a title does not guarantee us anything, it certainly improves our chances.

Of course, for this to be possible, we must remember the factors mentioned above. We cannot forget issues such as the evolution of the market, labor supply and demand, agreements and legislation.

The most important thing, however, is to choose well what we study. Thus, we can focus our efforts on learning things that help us work better, without forgetting the importance of financial education.

For this reason, from Economipedia, the leading portal in financial education, we encourage our readers to continue training and, thus, invest in their future.

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