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Is education a good investment

Is education a good investment?

Education has always been desired by people all over the world. Even in the ancient times people having a special knowledge and wisdom were respected by the whole society and their advice or decision sometimes played even dominant role over the ruler of the country. In Russia for a long time only people of aristocratic society could afford their children to get a proper education. Only in the Soviet Union the system of free education was establish so that people of nearly all social groups were able to get it. In fact even due to this system of obligatory school education and free high education it was not considered as a long-term and future oriented investment. Unlike Soviet Union, Western countries used eliteration approach for education. It states that not all the people can afford and are able to complete the education process. So there is no need for the government so much money on it. In this sense it helps to select the most productive and talented people for the labor market. In modern Russia the system of free higher education still remains but only partially. Moreover, the studying process is very costly and each family is to compare the benefits and costs of education before their child enters it. Normally this process of determination of such kind “investment opportunities” starts 2 or even more years before the entrance exams due to the complexity of choice of education field and long, costly and nerve-consuming preparation.
In my essay I tried to describe the costs related with education process and future career opportunities for the graduates in order to emphasize not only social but also economical benefits of education.
Costs of education
Preparation costs
Costs of education start from the very beginning. In order to have an opportunity to enter a prestigious university parents should plan their budget in advance and think of a good secondary school that provides the proper education in the chosen field of study. Costs of books, studying materials, education fees, everyday transportation costs, costs of finding the teachers from the chosen institution and hourly rates are only the subsequent ones.
The recent survey conducted by professor V. Glazychev was aimed to describe the situation of education in Russia. He asked the respondents to name the most common costs related with entering the higher institution and showed the table in the percentage of answers(%)

Costs of entering university To enter
University Technical colledge
Preparation courses 48 30
Transportation costs 39 40
Books, material 35 26
Apartment costs 22 20
Individual lessons 26 11
Medical services 17 23
Transaction costs (documents, etc.) 18 11
Pre-tests 18 5
Exams 13 13
Other services 5 5
Protection in the entering university 4 3
No payment required 17 28
Do not know 1 1

Source: http://www.glazychev.ru/projects/obrdocl/2004_obrdocl.htm
The most costly service out of this list and in fact the most effective one is individual lessons with the professors of the chosen university. The hourly rate depends on the prestige of the university but still varies between 30-100 euro pro lesson.
Actual costs of higher education
Having entered the institution on the financial bases you should think about the cost of studying. The average monthly pay for education equals 2200 roubles while the typical family with the average income statement can afford only 1230-1800 roubles per month. Normally this is the monthly education fee of colledge or technical institution. In this sense for most of the families the higher education is a huge and long-term investment that requires lots of efforts and sacrifice. For the students there is a necessity of evaluating the opportunity costs of studying. Because they may earn money even after school applying for the low paid and unskilled jobs. But the other side of such employment is no future career perspectives and wage increase.

Career opportunities for specialists
According to the UNESCO surveys educated people earn on average 2-4 times more than unskilled worker. Moreover 60% of wage earned is dependant on education and skilles and the rest 40% on health and mental abilities. In Russia this figure is 2 times and is ever growing. So the unskilled worker earns 2 times less than the one with high education.
This graph represents the differentiation of wages in the year 2005 according to the education determinants.

1 – board of directors
2 – high class specialists
3 – medium class specialists
4 – secretaries
5 – employees in the spheres of services and trade
6 – construction, building and extracting industries
7 – technitians
8 – unskilled workers

Source: http://www.gks.ru/wages/oktober05/okt05.htm
From this graph we can see that on practically all the available positions in the market people with higher education earn significantly more than those who do not have such.
Moreover if we take as a practical example IBS-Plekhanov faculty and calculate the difference between costs of education and possible wages we can see the following:
IBS-Plekhanov education fee per semester= 45000 roubles *2semester per year*4 years of education for bachelor degree=360000 roubles
Finance field is very demanded nowadays and has the highest wage all around Russia. On average it is 45000-50000 roubles per month in the year 2008.
From this simple statistics we can see that all nearly all costs of education can be covered within 1-4 years because we have to admit the lack of working experience of a graduate. Furthermore, if you decide to continue your education in this field the perspectives are even more optimistic. For example the MBA graduate officially earns at least $7000 per month in Western countries. In Russia not all of the employees are now able to pay such salaries for MBA graduates but still they are in high demand.
In this essay I tried to conduct a small survey of the Russian labor opportunities for both educated and not educated people and to emphasize the economical profitability and perspectivness of having higher education. In recent years the prestige and importance of education is growing and there are practically no job opportunities (well-paid) for people without higher education. Even though education requires large financial investments, physical and mental inputs, it gives you the opportunity to broaden your scope and wisdom, to communicate with educated and interesting people and afford you and your family the life you would like to have.

1. http://www.glazychev.ru/
2. http://www.rian.ru/
3. http://www.gks.ru/


1. Introduction 1
2. Costs of education 1
3. Career opportunities for specialists 3
4. Conclusion 4
5. Bibliography 5

Essay in labor economics №4
“Is education a good investment?”

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