Sonoma I cannot comment too much on the U.S. or Canadian university/college systems and the salary levels there but for Australia the majority of degrees from decent universities it takes at least 10 years (often much longer) to get ahead/see a return. Of course if you get a useless degree say an arts degree from bum-fuck/zanesville university you may never see a return.
Let's take two hypothetical examples we assume they are both citizens/residents of Australia (foreign students pay more for university). Also all figures are in Australian dollars:
Person A:
Does a 3 year degree at a prestigious university an goes on to do an honours degree (extra year), so 4 years in total. Let's they get a commerce degree with honours specializing in accounting from University of Sydney.
Its going to be around $43,000 AUD (for the 4 year period) just for the course fees. They can get a cheap government student loan for this (scholarships are hard to get but government loans are easy to get).
http://sydney.edu.au/study/finances-fees...-fees.html
Plus there are textbook fees, etc on top.
Now let us assume that they may work a little bit in a casual or part-time job but that they spend the small amount of money they earn and save nothing every year. At the end of 4 years they owe the government $43,000 in student loans and they have no savings and limited work experience. There is an interest rate attached to the loan (around 3% from memory).
Due to the honours degree they manage to get a graduate job with a large accounting/auditing firm or big bank, etc. immediately after graduation. Their graduate salary is $50,000 AUD before tax per annum. Let us assume that after their 4 year degree is finished they are 22 and decide to leave their parents house.
Let us assume they are frugal and can save $15,000 AUD per year from their salary. Let us assume they voluntarily decide to repay their student loans as quickly as possible (if you don't pay it back now you have to pay it back in the future anyway). The $15,000 in savings the first year brings the loan balance to $29,290 (due to 3% interest on the loan). They are 23 at the end of the year.
In the second year they get a pay rise and are paid $55,000 pre-tax salary. They manage to save $17,000 this year. This is due to the progressive tax system plus cost of living inflation so the $5000 pre-tax salary increase only translates to $2000 in extra savings. After paying the 3% interest at the end of the year the loan balance is knocked down to around $13,170. They are 24 at the end of the year.
The next year they get another small salary increase and now earn $60,000 pre-tax salary. This year after again taking into account cost of living increases and extra tax they manage to save around $19,000. After finishing off the remainder of the student loan they saved a total of $5800 during the year.
Let's say they invested the money they saved throughout the year in stocks (low cost index ETF) and earned a 4% after tax return (I use a conservative figure because not all the money was invested for the whole year). They now have $6032 in investments. They are 25 at the end of the year.
The next year since they now have a few years of experience under their belt they start getting decent promotions/bonuses/salary increases. This year they earn $75,000 pre-tax. let us say they are frugal and save $25,000 during the year. Added to the balance of $6032 from the year before and give the total a 4% after tax return you end up with net assets of $32,273. They are 26 at the end of the year.
The next year since they have good experience under their belt they again get a solid increase and now earn $90,000 pre-tax. Out of this they save $35,000. The net assets after including the 4% return now jumps up to $69,964. At the end of the year they are 27.
The next year they get a strong salary increase again and earn $110,000 pre-tax salary. They save $45,000 of their salary. After factoring in previous savings plus a 4% after tax return they now have net assets of $119,562. They are now 28.
Person B:
After they finish high school they are 18. They are not academically minded nor do they wish to work a trade so they get out there and do some entry level work in retail or customer service or sales or hospitality or construction, etc.
Lets assume they work a full time job and a part-time job (on nights/weekends) also as this is equivalent to the work load of a student studying full time at a good university while working casual/part-time. The parents agree to support them fully until they are around 22 (same age as university student finishes) because they have promised to work hard and partially save up for a house deposit.
Let us assume that over the first 4 years they get a pay rise every year due to a combination of factors that tenure brings about such as slightly higher bonuses, better paid shifts (e.g. more Sundays and public holidays, etc), as well as a mini promotion to senior team member/key-holder/shift supervisor/team leader, etc (I am not even talking about being an actual manager as those jobs are hard to get) as well as cost of living increases. Because the first 4 years they live at home with their parents and do not pay living expenses they save half of their pre-tax salary every year of living at home.
At the end of the first year of working 2 jobs they have earned $60,000 pre-tax salary and have saved $30,000 which they invest in a stock market ETF. After factoring in a 4% return they have $31,200 in net assets and are 19 at year end.
End of second year they have earned $65,000 pre-tax salary and have saved $32,500 which they invest in a stock market ETF. After factoring in a 4% return on total net assets they now have $66,248 in net assets at are 20 years old at year end.
End of third year they have earned $70,000 pre-tax salary and have saved $35,000 which they invest in a stock market ETF. After factoring in a 4% return on total net assets they now have $105,297 in net assets at are 21 years old at year end.
End of fourth year they have earned $75,000 pre-tax salary and have saved $37,500 which they invest in a stock market ETF. After factoring in a 4% return on total net assets they now have $148,508 in net assets at are 22 years old at year end.
In the fifth year they finally move out of their parents house and rent a place so they now have higher living costs. They now have to do their own house work such as cooking, cleaning, shopping, etc coupled with the fact that they are older and tired from working hard for 4 years they decide to cut back to doing only one full-time job and no other work (equal to the university graduate working full-time). Their earnings take a hit and they now earn a $60,000 pre-tax salary. The save $10,000 of their salary and invest it. At year end they have $164,848 in net assets and are 23 years old.
From now on they only get cost of living increases due to being unskilled their pay has hit a ceiling. They get an inflation adjusted $60,000 and save $10,000 again. At year end they have $181,841 in net assets and are 24 years old.
Next year they again save $10,000 and have net assets at year end of $199,514 and are 25 years old.
Next year they again save $10,000 and have net assets at year end of $217,894 and are 26 years old.
Next year they again save $10,000 and have net assets at year end of $237,010 and are 27 years old.
Next year they again save $10,000 and have net assets at year end of $256,890 and are 28 years old.
Conclusion:
When they are 28 both person A (degree) and person B (no degree) decide to cash out their investments and put it towards a apartment/house deposit. Person A has $119,562 (before calculating capital gains tax and brokerage fees) and person B has $256,890 (before calculating capital gains tax and brokerage fees).
You can see due to starting off way behind and the effects of compounding person A with a degree who now earns at least 60%-70% more than what person B with no degree earns is still behind. My assumptions were actually very generous towards the university graduate. Many university graduates will be lucky to even earn a 6 figure pre-tax salary by the time they hit 30. Also I could have very plausibly set the investment returns higher which would have favored the high school leaver. Sure eventually person A will likely overtake person B in wealth but my point is the pay off generally takes more than 10 years. Going to university is a very, very long-term investment. Of course you can argue the figures but overall I think I gave a reasonable hypothetical scenario. How many people can become an investment banker or a hedge fund manager or a surgeon, etc?
My examples are based on real world experience at looking at the types of salaries young people (including myself) around me earned (both university graduates and unskilled employees), as well as considering Australian Bureau of statistics data and looking at job websites.
In Australia the job market is very competitive and most drone type employees (which i based my analysis on) who do degrees like business/commerce/accounting, IT, teaching, HR etc earn a low starting/graduate salary (you can verify this by searching graduate positions in our largest job website
http://www.seek.com.au) and need at least a few years of experience under their belt to get decent pay increases. Sure somebody might study and become a senior geologist or a surgeon, etc and make heaps of money but I am just talking about your common drone type jobs that the bulk of university degree holders would do.
