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Income outcomes of tertiary pathways
Key findings

Understanding the earning potential of different tertiary pathways can assist school leavers in deciding what to do after finishing school. The gap in annual income between a graduate from university and an ITO (Industry Training Organisation) is closing, increasing the attractiveness of a future in the trades to school leavers. Because apprentices have a larger annual income while studying, they have a head start with lifetime earnings. The cumulative income of an ITO graduate is expected to continue to top university graduates’ until they are in their late thirties.

Introduction

After finishing secondary school, students are often encouraged to attend university with the conception that this will assure them a well-paying job. Apprenticeships in the trades are commonly overlooked as a viable option to reach the same goal. This report compares the differing income trajectories of tertiary pathways to assess if an apprenticeship is a credible option for school leavers aiming for a favourable income.

Methodology

Each year, groups of New Zealand residents that turned 19 and were enrolled in a tertiary institution were tracked based on their income. Each cohort is classified based on the year that they turned 19. The individuals were categorised based on the highest qualification they obtained by age 25 and their income was recorded. The median annual and cumulative income in each cohort for each category was tracked over time to compare the income outcomes of different tertiary pathways.

Annual income

The dashboard below represents the annual median income of the different study pathways over time. Use the sidebar to select the types of tertiary training displayed as well as various cohorts you wish to focus on.

ITO graduates, on average, start on a higher initial income. However, ITO graduate’s income growth is smaller than a university graduate. The age at which the university graduate’s median annual income surpasses the ITO graduates is increasing with the cohorts. In the 2003 cohort, university graduate’s median income passed the ITO graduates at age 28, while in the 2008 cohort we can see that the university graduate’s income is still below the ITO graduates at age 29.

It can be concluded that the median annual income of trade apprentices is continuing to increase with time relative to university graduates.

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Methodology

To conduct this analysis, 11 cohorts of 19 year old New Zealand residents that were enrolled in training institutions at age 19 from the Ministry of Education records. Each cohort is classified based on the year that they turned 19. These cohorts were then categorised based on the highest qualification the individual had obtained by age 25. Using IRD records the median incomes for each cohort was calculated based on the category they were in and tracked over time.

The categories include university, trade apprentices, other ITOs, ITP (Institute of Technology and Polytechnique), and no training. We broke up the Industry Training Organisations (ITOs) into two categories, trade apprentices and other ITOs. The trade apprentices comes from the trade related ITOs such as BCITO, Competenz, Skills Org, Connexis and MITO.

If a person moved overseas and had no income in that year they would be excluded from the calculation of the median, as they would not have active IRD tax records. Income is calculated from wages, salaries and business income sources. Beneficiary income and rental incomes are excluded.

Cumulative income

Focusing in on the 2003 cohort, it has already been noted that the university graduates overtook the trade apprentices’ annual income by age 28. However, at this same age, trade apprentices have earned $136,000 more than university graduates over their lifetime. By the time the cohort is 34, trade apprentices are still $80,000 ahead in terms of cumulative income.

As cohorts progress, the gap between the cumulative income is increasing between trade apprentices and university graduates. At age 28 in the 2003 cohort, the gap in cumulative income was $136,000, but in the 2009 cohort, this gap at age 28 had grown to $185,000.

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Methodology

To conduct this analysis, 11 cohorts of 19 year old New Zealand residents that were enrolled in training institutions at age 19 from the Ministry of Education records. Each cohort is classified based on the year that they turned 19. These cohorts were then categorised based on the highest qualification the individual had obtained by age 25. Using IRD records the median incomes for each cohort was calculated based on the category they were in and tracked over time.

The categories include university, trade apprentices, other ITOs, ITP (Institute of Technology and Polytechnique), and no training. We broke up the Industry Training Organisations (ITOs) into two categories, trade apprentices and other ITOs. The trade apprentices comes from the trade related ITOs such as BCITO, Competenz, Skills Org, Connexis and MITO.

If a person moved overseas and had no income in that year they would be excluded from the calculation of the median, as they would not have active IRD tax records. Income is calculated from wages, salaries and business income sources. Beneficiary income and rental incomes are excluded.

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