A Student’s View of Return On Investment

A Micro Perspective

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MICROECONOMICS focuses on the behavior of individuals in making decisions about the allocation of limited resources.

MACROECONOMICS looks at the performance, structure, behavior, and decision-making of the whole economic system.

MICROECONOMICS VERSUS MACROECONOMICS

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

Basic formula is:

!!! Return on Investment and Economic Impact are two different measurements.

Defining Return on Investment

ROI =(Gain from Investment-Cost of Investment)

Cost of Investment

Type of ReturnReturn on Total Tax Dollars Invested for the entire system Macro

Return on program cost within a school Macro

Return on investment for companies using Career Tech services Macro

Return on investment for the student Micro

Types of ROI Impacting Career Tech

Return on Investment and Economic Impact for Career Tech programs has been an important topic in recent years. Much of the discussion has focused on attempting to show the macroeconomic impact of training programs to taxpayers, communities, and all stakeholders. These discussions are important and relevant, but the many facets and moving parts involved in macroeconomics often makes it difficult to make definitive conclusions about economic impact and concrete returns on investment.

Macroeconomics: What’s the Big Picture

Microeconomics is about the direct impact of decisions to the individual. This presentation will focus on the micro, instead of the macro, impact to stakeholders and students using Career Tech programs. In macroeconomics, the concern is the overall level or rate of economic activity, and the activities that that cause it to change. Microeconomics is concerned with choices among alternatives, and their impact on an individual.

Microeconomics: What’s in it for me

Daughter Lindsey: Typical successful student and perfect daughter. Finished college in four years with a degree and a certification that allowed her to be employed as a school teacher.

Son-in-Law Matt: Typical imperfect boy “who’s not really good enough for my daughter” but somehow convinced her marry him anyway. Started college, but fortunately dropped out with only one semester’s bills to pay. Was successful working at an $9 an hour sales job (plus some commissions), but decided to enroll in a Career Tech Machining program. ◦ Started August, ◦ On-The-Job Training by March, and ◦ Employed as a machinist by May.

◦Dad happier!

Some Background and the Beginning

Lindsey’s investment: $12,487.50 per semester times 8 for a total of $99,900. (Not counting books, fees, and interest.)

Matt’s investment: $800 per semester times 2 for a total of $1,600 dollars. (Matt did pay an additional $870 for tools and books.)

The Eye Opener: Perfect daughter Lindsey and that Matt kid did not qualify for financial aid for Matt’s education so they had to write a check for tuition and materials. After starting his job at $16.50 an hour and working overtime, his first check was about $1,350. Daughter said, “Dad, did you know Matt will earn almost all of his school cost back after working three weeks? Do you know how long I’ll have to work make back my educational cost?”

My Answer: “Yes dear, I’m still paying for your college.”

Eye opener

At the same time my son-in-law was starting his new career, a leadership team at school was working on identifying and defining performance measures. This group met for several months and had lively and mostly constructive conversations.

The Holy Grail of performance measures was to find out how to gauge Economic Impact.

We made some progress, but the Grail is still elusive.

What we learned with the leadership team

Some performance measures can be determined based information we already collected

Some measure are important for internal planning Some performance measures must be extrapolated

from information into reports Some measures might be important for potential

customers

Some conclusion from the Leadership team

Identified Performance Measures in Career Major Programs (From Gordon Cooper Leadership Team)

Job Placement

Continuing Education Placement

Cost Per Student

Enrollment

Retention/Completion

Academic Improvement

High School Graduation Rate

Satisfaction of Employers

Wage Rates

Student Satisfaction

Industry Certification Pass Rate

Info needed for economic impactInfo we already collectedInfo we started collectingInfo we need to collect

LIFE is about Choice…Consequences and Rewards

The Game of Life taught us about choices…but it also taught us a little about luck.

A micro look at ROI will focus on individual choices.

We DID NOT set out to develop this performance measure

But it seemed to be something that was relatively concrete

It also seem fairly easy to determine ROI for the student might not satisfy all

stakeholders, but might be useful for student recruitment and for student decision-making

ROI for the Student

What we learned

Tuition Hours Time Total Projected Projected Hours Hours Required Dollar Return Dollar Return onCost Required Investment1 Investment2 Hourly Salary Annual Salary3 To Recoup To Recoup Total on Tuition Tuition & Time

Tuition4 Tuition and Time For First Year For First Year

$1,830 1050 $7,613 $9,443 $13.47 $28,017.60 135.86 701.00 $15.31 $2.97

From School Catalog

1Hours of Training times minimum wage

2Tuition plus Time Investment

From Wage Survey Report

3Hourly Salary from Wage Survey Report X 40 hours X 52 weeks in a year

4Tuition / Hourly wage

Tuition + Time / Hourly wage

Salary / Tuition

Salary / (Tuition + Time)

Lindsey had been wrong. When you calculated the time investment in a training program, it took a little longer than three weeks to earn all the investment back.

$354 40 $290 $644 $11.09 $23,067.20 31.92 58.07 $65.16 $35.82

Comparisons

Tuition Hours Time Total Projected Projected Hours Hours Required Dollar Return Dollar Return onCost Required Investment1 Investment2 Hourly Salary Annual Salary3 To Recoup To Recoup Total on Tuition Tuition & Time

Tuition4 Tuition and Time For First Year For First Year

$279 96 $696 $975 $8.50 $17,680.00 32.82 114.71 $63.37 $18.13

$350 40 $720 $1,070 $19.00 $39,520.00 18.42 56.32 $112.91 $36.93

$6,952 1575 $11,419 $18,371 $22.00 $45,760.00 316.00 835.03 $6.58 $2.49

$1,830 1050 $7,613 $9,443 $13.47 $28,017.60 135.86 701.00 $15.31 $2.97

Private Security ROI

Certified Nurse Aide ROI

PLC Programmer ROI

A & P Aviation Mechanic ROI

Welding ROI

More comparisons

$2,470 1050 $7,613 $10,083 $17.00 $35,360.00 145.29 593.09 $14.32 $3.51

Tuition Hours Time Total Projected Projected Hours Hours Required Dollar Return Dollar Return onCost Required Investment1 Investment2 Hourly Salary Annual Salary3 To Recoup To Recoup Total on Tuition Tuition & Time

Tuition4 Tuition and Time For First Year For First Year

$26,400 2040 $14,790 $114,690 $32.81 $68,244.80 3,044.80 3,495.58 $0.68 $0.60

Matt’s ROI

Lindsey’s ROI*

Accountant ROI

Dentist ROI

Dental Hygienist ROI

$240,000 4080 $29,580 $269,580 $70.64 $146,931.20 3,397.51 3,816.25 $0.61 -$0.55

$124,875 2550 $18,488 $143,363 $12.00 $24,960.00 10,406.25 11,946.88 -$0.80 -$0.83

Undecided ROI

$26,400 2040 $14,790 $41,190 $15.50 $32,240.00 1,703.23 2,657.42 $0.22 -$0.22

$26,400 2040 $14,790 $41,190 $29.66 $61,692.80 890.09 1,388.74 $1.34 $0.50

BUT…The Longer Term Impact

Private Security ROI

Certified Nurse Aide ROI

PLC Programmer ROI

A & P Aviation Mechanic ROI

Welding ROI

1st Year Per Year 5 YearReturn for Impact Return for

Tuition & Time Tuition & Time

$22,423.20 $7,987.20 $114,692.00

$16,705.00 $2,600.00 $87,425.00

$38,450.00 $24,440.00 $196,530.00

$27,389.25 $30,680.00 $210,429.25

$18,575.10 $12,937.60 $130,645.50

Per Year Impact calculated by taking annual salary minus annual minimum wage salary.

BUT…The Longer Term Impact

Matt’s ROI

Lindsey’s ROI

Accountant ROI

Dentist ROI

Dental Hygienist ROI

Undecided ROI

1st Year Per Year 5 Year

Return for Impact Return for

Tuition & Time Tuition & Time

$25,277.50 $20,280.00 $166,717.50

-$8,950.00 $17,160.00 $78,820.00

$20,502.80 $46,612.80 $226,084.00

-$122,648.80 $131,851.20 $195,496.00

$27,054.80 $53,164.80 $258,844.00

-$118,402.50 $9,880.00 -$161,925.00

Does not factor long-term earning potential Does not consider previous learning and experiences Training and education is still only a part of the puzzle related to

student success in a career A person’s pay is not the only indicator to success and fulfillmentBUT It does show a correlation between tuition cost, time investment,

and wage rates It does give a student more information to make intelligent

educational choices It does give policy makers comparisons to make program decisions

and could help students make better decisions for their future

Limitation to Student ROI

Students can be successful in a many ways. We need to be brutally honest when we provide career

counseling. Do we need to talk about educational ROI for

students?

More Questions contact: Bob Perry bobp@gctech.edu Marty Lewis martyl@gctech.edu

So What does all this mean?