Study shows winning at the starting line is a reality

May 24, 2016 18:04
Studying hard matters, but family background can matter more when it comes to earnings potential. Photo: Xinhua

Parents always tell their kids to study hard, get good grades and make a lot of money when they grow up.

This mentality incorporates some traditional Chinese core values.

However, the recent 2015 Study on Earnings Mobility shows other factors may play a greater role.

The study focused on first-degree graduates from the 2001/02 and 2006/07 cohorts and how their earnings varied five and 10 years after graduation.

It assessed various factors, including education, discipline and family background.

There are four interesting findings.

First, first-degree graduates earned far more -- an average of HK$500,000 (US$64,368) per year 10 years after college -- than sub-degree ones, who earned HK$290,000 per year (42 percent less) after 10 years.

So, going to college is quite a good investment in Hong Kong.

Second, the income gap between first-degree holders and those with postgraduate degrees was less obvious.

Postgraduates earned an average of HK$580,000 per year 10 years after graduation, 16 percent more than first-degree graduates.

However, the study included only publicly funded programs in the postgraduate group, rather than taught programs.

These publicly funded programs, leading to degrees such as a master's of philosophy or a doctor of philosophy degree, are only available for top-performing students, who usually spend three to seven years in such programs.

But these top-tier graduates eventually earned just marginally more than first-degree holders.

Also, a considerable number of these publicly funded programs are for future doctors and lawyers, which means their income levels have already inflated the average earnings for holders of postgraduate degrees.

Third, self-financed sub-degree graduates actually earn more than publicly funded sub-degree graduates.

Generally speaking, students with a better academic performance are eligible for publicly funded sub-degree programs.

Others need to pay about HK$100,000 in tuition for self-financed programs.

In the first year after graduation, publicly funded sub-degree graduates earned HK$30,000, 35 percent more than self-financed sub-degree graduates.

However, the self-financed sub-degree graduates caught up and even overtook the publicly funded sub-degree graduates in income five years after graduation.

I believe there are two main factors at play here.

One is that self-financed sub-degree students would have a greater incentive to study hard and get good grades after paying such a large amount for tuition. That would make them more competitive in the job market.

The other is that these self-financed sub-degree graduates usually have good family backgrounds, which helps their upward earnings mobility.

Fourth, the study showed that “winning at the starting line” does exist in Hong Kong, and it becomes more obvious as the years go by.

In the 2006/07 cohort, publicly funded first-degree graduates from the highest family income group had conspicuously higher earnings than those from lower-income families.

And they were more likely to reach the 70th percentile of the income distribution a few years after graduation.

In fact, young people from wealthy families usually have better connections and soft skills, have seen more of the world and are usually more versatile than graduates from poor families.

These invisible advantages will help in climbing the social ladder.

Some might say young people with grass-roots upbringings have more street smarts. However, there is no strong data in evidence of that argument.

This article appeared in the Hong Kong Economic Journal on May 24.

Translation by Julie Zhu

[Chinese version 中文版]

Young Hongkongers enjoy pay rises but still can’t afford a home (May 23, 2016)

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Hong Kong Economic Journal columnist