Hypothetical earning power comparison from economist Laurence Kotlikoff

[my_0.02]

<p>

All four of these hypothetical kids settle down in Ohio, remain single, and retire at 62. At age 50, the peak earnings year for all four, Joe, the plumber, makes $71,685 (in today’s dollars). Sue, the teacher, makes $89,584. Matt, the teacher with the master degree, makes $103,250. And Jill, the doctor, makes $185,895. All figures and others used in this analysis are based on earnings data by age, state and occupation.

</p>

<p>[Study</a> Hard to Find If Harvard Pays Off: Laurence Kotlikoff - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

[norcalguy]

<p>

Jill, the doctor, has the highest living standard. She gets to spend $33,666 year in and year out from age 19 through 100 This is after paying all her taxes and Medicare Part B premiums. Age 100 is the maximum age to which the kids might live and, thus, must plan.</p>

<p>Come again? Only $33,666? That’s a far cry from Jill’s peak earnings of $185,895. Yes, but remember, Jill has only about 31 years of significant earnings to cover some 81 years of living. And when Jill works, she gets nailed by the taxman. At age 50, for example, Jill pays 36 percent of her earnings in federal and state income taxes and payroll taxes.</p>

<p>Finally, Jill has a bucket load of student loans to repay at an assumed 5 percent real interest rate, which exceeds the assumed 3 percent real return she can safely earn on her savings.</p>

<p>Plumber’s Pay</p>

<p>To add insult to Jill’s injury, Joe the plumber’s sustainable spending is almost as high – $33,243. All those grueling years of study, exams, late-night emergency calls, and Jill gets to spend a measly $423 more per year than a plumber.

</p>

<p>Makes you wanna rethink medicine.</p>

[ViggyRam]

<p>

Jill chooses medicine. She goes to an expensive private college for four years, an expensive medical school for four years, does a low-paying internship for two years followed by a low-paying residency for one year, and finally, 11 years after high school, gets a real job, as a general practitioner.

</p>

<p>But it says that Jill goes to an expensive private college for 4 years and chooses a career as a GP. Wouldn’t this sway the data against her favor (current situation v. state UG school with some scholarship money, state med school, career in something like orthopedics)?</p>

<p>I skimmed the article very, very quickly, so I may have missed something. I’ll reread it in case.</p>

[DougBetsy]

<p>I like the concluding paragraph:

These examples are a far cry from an exhaustive study of the returns on investing in higher education. And they treat higher education as purely a financial investment and ignore its tremendous personal and social non-pecuniary rewards. Still, the examples present a big red flag for those who pursue higher education solely for the money. And they raise a major question about government policy that promotes higher education as the sure path to economic success.

</p>

<p>I always cringe when people on CC say one major or one school is better than another based soley on what the earning potential is. There is no 1:1:1 relationship between those factors. As the author describes, too many other factors are often overlooked, such as debt, delayed entrance to the work force, regional cost of living, etc. etc.</p>

<p>So, if the degree doesn’t bring more money, then why bother? Well, of course there’s conventional wisdom that an educated society is a better society. But, on a material, personal level, why bother?</p>

<p>I’m encouraging my kids to take the college path for the sake of employability. Neither one is cut out for a skilled trade, nor would either thrive in an unskilled vocation. But, with a college degree, they could (hopefully) expand their options and let their careers evolve over the decades. Without a degree, I believe the risk of “dead-ending” is far greater.</p>

<p>So, that’s my $0.02. ;)</p>

[premed4]

<p>It makes you think if it is the most important factor to you. Either way though I would rather be a doctor any day than a plumber not thinking about pay.</p>

[kluge]

<p>This reads like the same guy* who was quoted in a different thread recently. If so, it’s a sneaky bit of spin doctoring. He assumes that the plumber gets a job day 1 out of high school and progresses steadily to the top of his profession without ever being laid off or otherwise unemployed. He loads his doctor down with private school undergraduate and medical school debt, the interest from which is subtracted from her pay. Then he retires everyone at age 62 to give the early-earner the greatest possible apparent advantage. (Of course, it’s probably more realistic to assume that a plumber would need to retire at 62 than that a doctor or teacher would choose to do so.)</p>

<p>I also like the reference to “All those grueling years of study, exams, late-night emergency calls, and Jill gets to spend a measly $423 more per year than a plumber” – who got to spend those same years that Jill was suffering through the life of a student enjoying the splendor of a job unclogging toilets. Poor, poor Jill… :D</p>

<p>Premed4 is right, though - you should choose your occupation based on your interest in practicing it, not on the anticipated moolah.</p>

<p>*Edited to add: Yeah. It’s the same guy. He wrote a longer version of this which was discussed in this thread, halfway through: <a href=“http://talk.collegeconfidential.com/pre-med-topics/1088974-medicine-money-why-lie.html[/url]”>http://talk.collegeconfidential.com/pre-med-topics/1088974-medicine-money-why-lie.html&lt;/a&gt;
Kotlikoff is the kind of economist who gives the profession a bad name, IMHO. He has a point, but he apparently feels the need to cherry-pick data and exaggerate assumptions to overstate it. Tsk tsk.</p>

[my_0.02]

<p>Yeah, the variables presented do seem to be optimized to support a particular conclusion, but there are many unconsidered variables.</p>

<p>Unconsidered variables include the expansion of “mid-level” practitioners replacing MD’s, declining professional fees, impending insolvency of medicare (important for private insurance commonly set as medicare + 10%), effect of antitrust rulings preventing MD unions, ability of plumbers to choose clients, collection using lien mechanisms, overtime and travel time pay.</p>

[bluebayou]

<p>I think he does raise some good points for consideration, and probably should have thrown in a few Wall Street i-bankers, and federal government employees for comparison.</p>

<p>But, I gotta say my plumber works many loooonnnng hours. When a pipe burst in our concrete slab, he came over early am to turn off the water, went and completed his other customers that day, returned at dinner time, and worked until mid-night to temporarily stop the leak and turn on partial water for showers the next morning. Something similar happened when the ac went out during a heat wave. He said that during his ‘busy time,’ he routinely puts in 16+ hour days to make up for the days when there is little/no work.</p>