The Financial Benefits of Not Getting an Education : An Exploratory Study of the Opportunity Cost of Higher Education

Abstract

The present study aimed to explore the financial opportunities of a person without higher education in Norway. It consists of simulations of different investment strategies, and compares the earnings of an individual without higher education, to the earnings of a person with five years of education. The underlying assumption is that they both have equal consumption while the student is getting his/her degree – i.e. equal to the student income. Averages and estimates where used to establish income figures. The investment amount was the accumulated surplus the person without higher education had compared to the student during his/her education. Two different simulations of investment strategies were applied; investments in a savings account and in a passive index fund. None of the simulations put the person without education ahead in nominal lifetime earnings. The study showed that a person without education could alter his/her income profile in a meaningful way, and reduce the lifetime earnings gap to an educated person, by adjusting his/her consumption in the initial years of his/her work life and by making favorable investment decisions.