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Even having a good job is no guarantee you'll be able to build enough wealth to move up a social class. Especially considering people of color are more likely to support other family members with their income.
One of my former coworkers has essentially 2 jobs to help her parents pay for their mortgage and little brothers expenses. She is a computer programmer and contracts on the side to pay for her expenses and her family's.
The topic is wealth. While the college educated have a higher lifetime earnings potential, there is more than one study which concludes that, adjusted for all factors, the average family wealth at retirement age is the same regardless of education.
Certainly a small percentage of professions will typically result in higher net worth. But many people build real wealth without ever attending college.
The reasons are pretty clear - the more you earn, the more you spend. The standard of living may be higher, but unless the excess earnings is invested and saved over time, it doesn't result in long-term wealth.
In the short-term, college is a losing proposition for many people from a cash flow and wealth standpoint. In the long-term, unless they are disciplined and plan, the high-income guy will not be any better off than his plumber or garbage man neighbor from a wealth perspective.
I understand what you are saying, however it is not exactly accurate. There is a high correlation between intellect and income, whereas there is no correlation between intellect and wealth. That being said, there is a correlation between a college education and lifetime wealth. While it is true that those who earn more spend more, but they also save more as well. College is hardly a losing proposition from a cash flow and wealth standpoint. Those who go to college (on average) still have a dramatically higher lifetime net worth than those who do not. The numbers disagree with you. The high income person will absolutely be better off than his plumber or garbage man neighbors from a wealth perspective. The second chart uses values from the US census. You can find a link to a spreadsheet with the census data on household wealth by education level here.
Graduating from college was the best thing I ever did for my household wealth. I had a lot of help from family and the GI Bill ('Nam River Rat).
If I had continued with my career as a machinest/machine builder I would have probably been unemployed years ago and dead broke, if not actually dead, by now. Instead I own a home free of debt and actually have some invested capital. I also have a defined pension and health insurance for the rest of my life.
I understand what you are saying, however it is not exactly accurate. There is a high correlation between intellect and income, whereas there is no correlation between intellect and wealth. That being said, there is a correlation between a college education and lifetime wealth. While it is true that those who earn more spend more, but they also save more as well. College is hardly a losing proposition from a cash flow and wealth standpoint. Those who go to college (on average) still have a dramatically higher lifetime net worth than those who do not. The numbers disagree with you. The high income person will absolutely be better off than his plumber or garbage man neighbors from a wealth perspective. The second chart uses values from the US census. You can find a link to a spreadsheet with the census data on household wealth by education level here.
First, I stated "in the short-term" on a cash flow basis.
Second, the mean data studies on net worth are interesting. If your neighbor worked for the federal government or the state or any agency that offered a traditional defined benefit plan, the present value of that annuity isn't on his personal balance sheet. The old BART workers retire with a pension that would equate to million dollar 401(k) balance. On paper, they are a million dollars poorer than you. What demographic has the highest participation in pensions?
My Stanford buddy did some work in 2000 on the subject. The numbers are much closer than portrayed. His work is dated now but probably hasn't changed too much.
DD – that is all too true. I want to advise every baby to be certain they are born to sane, sober and wealthy, as in so wealthy their capital supports them without their working, family. With their income secured these kids are far likelier to live peaceful, fulfilling and accomplished lives then the rest of us. Unfortunately I did not manage to tell this to myself in time. My parents were neither sane, sober or wealthy.
First, I stated "in the short-term" on a cash flow basis.
Second, the mean data studies on net worth are interesting. If your neighbor worked for the federal government or the state or any agency that offered a traditional defined benefit plan, the present value of that annuity isn't on his personal balance sheet. The old BART workers retire with a pension that would equate to million dollar 401(k) balance. On paper, they are a million dollars poorer than you. What demographic has the highest participation in pensions?
My Stanford buddy did some work in 2000 on the subject. The numbers are much closer than portrayed. His work is dated now but probably hasn't changed too much.
Higher standard of living: yes.
Higher lifetime earnings: yes.
Higher wealth at death: not so much.
You seem to have missed the second study (as well as the spreadsheets I linked). I gave you data on not only net worth, but on net financial assets as well. Again, your conclusions don't match the data. Can you look at the spreadsheet I linked to that refers to net financial assets (and the fact that they are dramatically higher for the college educated than any other group)?
Higher wealth at death? Absolutely. Again, you have not posted any actual data to support what you say. Can you give me a link to your buddy's research?
You seem to have missed the second study (as well as the spreadsheets I linked). I gave you data on not only net worth, but on net financial assets as well. Again, your conclusions don't match the data. Can you look at the spreadsheet I linked to that refers to net financial assets (and the fact that they are dramatically higher for the college educated than any other group)?
Higher wealth at death? Absolutely. Again, you have not posted any actual data to support what you say. Can you give me a link to your buddy's research?
When I have some time I'll look at your data. I'm always willing to learn.
The debt free person making $30k has more wealth in the present, but the person with a $100k salary and $200k in debt has a higher ceiling in terms of potential net lifetime wealth. I would argue that the person with the $100k salary and $200k in debt is in a better financial position than $30k and no debt, assuming that person is young enough to work for a few more years.
At a $70k gap per year -which would most likely grow by a far bigger gap, over 25 years, the 100k employee would have made (before factoring 70k growing) 8.75 times the 200k debt above the 30k guy.
Add in, the 30k guy has virtually no discretionary income. That is a paycheck to paycheck subsistence level.
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