What is the payoff to education? The Institute for Employment Research (IAB) published a report tracking yields on education for 12 Western European countries. Taking into account costs associated with education, every extra year in school or university adds 6,07% to future income.
Steep returns in Portugal, weak in the Netherlands
In Portugal (8,76%), Luxembourg (8,66%), Ireland (8,37%) and Spain (7,19 %) studying longer pays particularly well. France (6,06%) and Germany (5,07%) have average and below average yields to education. The lowest return is realized in the Netherlands (3,65%) and Sweden (3,99%).
The effect is overall larger for women (6,29%) than men (5,85%) which the researchers attribute to the phenomenon that low qualified women usually have particularly badly paid jobs. Due to family and household obligations they are not able to take on better paid positions that involve shift or nightshift work.
Complete picture on return to education
Structural differences in labor markets explain some part of the variations in those 12 countries. Qualified women in Sweden for instance tend to work for the public sector where wages are low, while in the Netherlands part-time work is popular among women.
The report indicates both Mincer coefficients and yield to education for all cases. Mincer coefficients refer to a statistical growth in income from being better educated. Yield to education by contrast also accounts for progressive tax payments from this greater income and overall job market participation.
Costs to education are determined through direct costs (e.g. tuition fees) and opportunity costs. The latter are incurred if an individual spends time studying instead of earning money from entering the job market right away.