Tuesday, December 30, 2008

Is a Gap Year Worth the Cost?

A recent article in the WSJ, "New High-School Elective: Put Off College," by Toddi Gutner indicates that guidance counselors and college admission counselors have been increasingly advising students to take a year off between high school and college. The article names several social service programs that can provide broadening experiences. The formal programs can cost between $10,000 to $20,000.

It does seem strange that you would have to pay for the privilege of providing a social service. However, if the non-monetary benefits exceed the costs, this could be a good decision for many prospective college students who are on an uncertain career path or need the added maturity before entering college. Always choosing the alternative that maximizes the dollar return will not necessarily lead to the greatest happiness. You should carefully weigh the cost of your non-monetary pleasures against your opportunity costs. Guidance counselors might point out that the cost of a gap year will include not only the cost of the program, but also the cost of delayed labor market entry. This means one less year of worklife and a one year shift in your age-earnings profile, meaning all future increases in your annual earnings will be delayed by one year. Assuming you would have earned $40,000 in real dollars during your first year, that represents one lost year of earnings with a present value of about $40,000. Given an annual real increase in your earnings of 3 percent and a 36 year worklife, the shift in the age earnings profile results is another $42,000 ($1,200 x 35) in lost earnings. Thus, the cost of the gap year could be $82,000 plus program costs. The non-monetary benefits, whether they be personal or social ones, better be worth these significant costs. Otherwise, we all might be better off if you skipped the gap year and donated your increased earnings to charity.


  1. This analysis is much too simplistic. It takes into account the income side of the gapper's balance sheet.

    A better analysis would also look at the costs of working. For example, rent, food, transportation, etc.

    Basically, a look at any debt or savings from the year, whether gap or work, would give a better quick take. As for the 3% compounded earnings loss, just one question. Have you considered the value to the applicant's resume of the gap year? Might the individual's value to a company increase. Note that many employers say it does.

  2. I admit the analysis is too simplistic. Let's consider it a starting point. You might argue that the pay differential is smaller due to skills or knowledged gained during the gap year. Regardless of what employers say, they are not likely to pay more if the gap year does not enhance the student's productivity.

    I thought I made the point that non-pecuniary benefits should also be included in the decision calculas. I only meant to suggest that students considering a gap year should consider the cost in terms of lost income.