Financing Your Life Dreams:
Education is a Costly But Wise Investment

by Vern R. Johnson

Ed. Note: This article is aimed at teenagers who are already on their career paths, whether they recognize it or not. If you know a teenager or two, share this with them.

What is your dream? What will your life be like in, say, 15 years? What level of annual income will you need to support your dream? This question is significant, because what works for one person may not be enough for the next.

For most readers, some obvious advice might be to seek the high end of the earning scale as far as it is consistent with personal goals and values. But some conditions, such as low-level skills; education and job skills for which there is limited demand; and job skills for which the recipient cannot offer a reasonable wage, can reduce access to higher earnings levels. Those who plan to earn higher salaries will probably want to avoid these. 

What is your future going to be? It's all up to you, but just dreaming about it is not enough.

The job market does not cater to the past. Young people whose education and skill levels are no stronger than their parents' may not be equipped to compete in a world that is much more intellectually demanding. Yet the types of activities encouraged during high school and college are often in areas that lead toward the enjoyment of life, not toward the practical aspects of earning a living.

Most jobs now demand increased skill levels. Not long ago, people with typing and spelling skills could get jobs as  secretaries and earn a reasonable wage, but the demand for such skills has largely been fulfilled by word processors.  Factory floor workers who could run a lathe or milling machine were once assured continuing employment, but the introduction of quality control standards now requires them to understand statistical process control and computer data entry.

New technology is everywhere. Computers have completely altered the business world, and the Internet has changed communication forever. Technical skills are needed, but so are others. American business now considers the following six additional basic skills groups to be essential for any kind of future employment:

• Knowing how to learn
• Listening skills and oral communication
• Creative thinking and problem solving
• Personal management
• Group effectiveness
• Organizational effectiveness and leadership

Once a person is employed, increases in earnings are based on increased productivity. There was a time when people who worked for the government or for "big business" could rely on "seniority" or "tenure" for career-long job security. Annual raises were considered entitlements. But continued employment can no longer be assumed, and employers now increase wages only if employees increase productivity. 

For personal income to increase, it is now necessary to produce more and take more responsibility — or look for another job. Those who understand this principle have offered sage advice:

• "If a man is called to be a street sweeper, he should sweep streets even as Michelangelo painted or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, 'here lived a great street sweeper who did his job well.'" (Martin Luther King, Jr.)

• "The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can't find them, make them." (George Bernard Shaw)

What can you do to increase the chances of having enough income to make your dreams come true? If you are going to invest in your own future, in what should you invest? I see three possibilities: you can inherit a lot of money, you can try to win an income by investing in lottery tickets, or you can initiate an effort to develop employable skills by investing in learning.

Does the Lottery Lead You to "the Jackpot?"

For those who opt for the lottery route, let's consider the potential. There are lotteries in 33 states. In my state (Arizona), hopefuls play "The Pick." To win, a player must choose six correct numbers out of 41. That makes the probability of winning: 6/41 * 5/40 * 4/39 * 3/38 * 2/37 * 1/36 = 1 / 4,496,388. Put another way, you must play 4,496,388 times to win once.

What is the payoff for an investment in the lottery? On average for the Pick, the nine jackpots hit during the year 2000 were worth $1,940,000 each, and winners were paid off over a 25-year period at an average rate of $77,600 per year. Inflation decreases the value of money by about six percent each year, so over 25 years, the value of the payoff gets smaller and smaller until it reaches about $17,600 per year in today's dollars. So on average, in today's dollars, the payoff is about $40,719 per year (only about $30,540 after taxes). This sounds pretty good, but do you know anyone who has won the lottery? You probably don't. Do you know anyone who earns this much? You can bet on it. In fact, according to the IEEE-USA Salary & Fringe Benefits Survey, 2001 Edition, overall compensation for the average electrical engineer in the United States has topped $99,000 per year — almost three times what a lottery winner gets. The lottery doesn't sound like such a great deal anymore, does it?

The odds are against you if you plan to gamble on the lottery for your future. You pay $1 for one chance in 4,496,388 to win back $763,477. That gives odds of 5.89:1 against you. That's equivalent to flipping a coin and calling heads. If it's tails, you lose $1; if it's heads, you win 17 cents.

The Education Path — The Wiser Investment

Becoming an electrical engineer requires an education. What is the payoff for an investment in a college education? Again, I'll use data from my home state, but similar data are available in most other states. For tuition, the University of Arizona charges in-state students $2,490 and out-of-state students $10,356. Out-of-state students must pay the full cost of education, while in-state students without scholarships or financial aid pay only 24 percent of the cost of education. You can invest $1 in an education and receive $4.18 worth of value. Conclusion: invest $1 in the lottery and get 17 cents' worth of value — or invest $1 in a college education and get $4.18 worth of value. Up front, the college investment is almost 25 times better than the lottery.

Of course, the real benefit comes after graduation. The effect of education on average wages and unemployment rates for the year 2000 was:

Compared to the average high school graduate, a dropout earns 22 percent less, with 64 percent more unemployment, while the average college graduate earns 85 percent more, with about half the rate of employment. The average college graduate surpasses the lottery winner, and the average electrical engineer can plan on a significantly higher salary to support his or her dreams.

Let me ask the question again: What is your future going to be?

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Vern R. Johnson is Associate Dean of Engineering at the University of Arizona in Tucson, Ariz., and is IEEE-USA's Career Activities Editor.