How Much Education Helps to Get a Better Job?
New OECD report on education in developed countries shows that the economic crisis has amplified the value of a good education.
July 02, 2013 by Andreas Schleicher
8 minutes read
© Dana Smillie / World Bank

New OECD report about the status of education

While this blog is primarily concerned with education in developing countries, it might be interesting to take a look at the status of education in developed countries to see what works there.

The 2013 Education at a Glance Report produced by the Organization for Economic Cooperation and Development (OECD) provides data on the structure, finances, and performance of education systems in more than 40 countries — most of them OECD members and a few developing countries.

This year’s report comes at a time when youth unemployment keeps policy makers awake at night.  Between 2008 and 2011 unemployment rates climbed steeply in most countries and have remained high ever since.  Young people have been particularly hard-hit by un- and underemployment as a result of the global recession.  In 2011, the average proportion of 15-29 year-olds neither in employment nor in education or training across the OECD was 16% compared to 20% for the group of 25-29 year-olds.  In some countries the figures are much higher, with more than one in three people between the ages of 25 and 29 neither in education nor in work.  These young people are forced to pay a very high price for a crisis that was not of their making, with long-lasting consequences on their skills, work morale and social integration.  The demoralizing short-term effects for individuals, families and communities demand urgent policy responses, while the longer-term ramifications, in terms of skills loss, scarring effects and de-motivation, are real and affect countries’ potential for sustainable recovery.

The value of a good education

But this year’s indicators also show how the economic crisis has amplified the value of a good education.  That is shown by the widening employment gap between well-educated youths and those who left school early. And it is shown in a widening earnings gap: In the OECD area, the average difference in earnings between those who didn’t finish high school and those who have a university degree has risen from 75% in 2008 to 90% in 2011.  From a purely economic point of view, private returns on investment are well beyond 10% per year.  Also taxpayers gain significantly in the form of higher tax payments by better educated people.  Fears that increasing participation and greater numbers of graduates – resulting in ever-increasing numbers of highly qualified people in the work force – would result in some kind of inflation, in diminishing returns and burgeoning graduate unemployment are not confirmed by the data.

The crisis has also produced ample evidence that a good education provides valuable insurance against a lack of work experience: the impact of educational attainment on unemployment is much greater for younger people than it is for older adults.  Across OECD countries, an average of 18% of 25-34 year-olds without secondary education were unemployed in 2011, compared with 9% of 55-64 year-olds.  Among 25-34 year-olds with a tertiary qualification, an average of 7% were unemployed, compared with 4% of 55-64 year-olds with a similar level of education.

Education reduces economic and social risks

The message is clear: it is a person’s education that determines whether he or she will be extremely or only moderately exposed to economic and social risks in times of crisis.  Those without a minimal level of education, and certainly those without a stable job, find themselves without any shelter from the storm.  Meanwhile, the relative returns on higher education increase.  Some might argue that this is largely due to structural changes in the labour market: highly educated people taking the jobs of the middle-educated individuals, who, in turn, drive low-educated workers into unemployment.  The earnings data do not seem to confirm this hypothesis.  If tertiary-educated individuals were to take medium-skilled jobs en masse, their wage would not have increased as much as it did. In addition, the wage increases with age, which suggests that the higher level of skills among tertiary-educated workers is compensated in their salaries.  In times of crisis and tough competition in the labour market, employers are less willing to value skills as much as they seem to do at other times.

The gap between skills and employers’ needs 

And yet, while the economic and social benefits of education are high, Education at a Glance shows some countries with unemployed graduates on the street, while at the same time, employers say they cannot find people with the skills they need.  That shows that more education does not automatically translate into relevant skills, better jobs and better lives.  This year’s data shows the value of vocational qualifications as a pathway to employment. Countries with a higher share of vocational graduates, think of Austria, the Czech Republic or Germany, saw youth unemployment rise much less than their peers with only academic qualifications.  What this says is that we need to focus on skills-oriented learning throughout life instead of qualifications-focused education upfront.  Skills development seems to be simply more effective if the world of school and the world of work are integrated. Compared to purely government-designed curricula taught exclusively in schools, learning in the workplace allows people to develop “hard” skills on modern equipment, and “soft” skills, such as teamwork, communication and negotiation, through real-world experience.  Hands-on workplace training also seems to help motivating disengaged youth to stay in or re-engage with education and smoothen the transition to work.

At yet, while vocational education is a great way into employment, the data also show that the long-term benefits of a university education later in life remain unsurpassed.  That’s why this should not become a question of pushing young people to make a choice between academic and vocational education, but about providing them with the right mix of academic and vocational skills.

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