Education pays 6% per year

Nieuws | de redactie
5 april 2012 | A German research institute calculated that every year of education adds 6% to future income. Portuguese education (8,76%) pays particularly well, while the Netherlands (3,65%) scores the lowest. Overall, women profit more than men.

What is the payoff to education? The Institute for EmploymentResearch (IAB) published a report tracking yields on education for 12Western European countries. Taking into account costs associatedwith education, every extra year in school or university adds 6,07%to future income.

Steep returns in Portugal, weak in theNetherlands

In Portugal (8,76%), Luxembourg (8,66%), Ireland (8,37%) andSpain (7,19 %) studying longer pays particularly well. France(6,06%) and Germany (5,07%) have average and below average yieldsto 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 lowqualified women usually have particularly badly paid jobs. Due tofamily and household obligations they are not able to take onbetter paid positions that involve shift or nightshift work.

Complete picture on return to education

Structural differences in labor markets explain some part of thevariations in those 12 countries. Qualified women in Sweden forinstance 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 toeducation for all cases. Mincer coefficients refer to a statisticalgrowth in income from being better educated. Yield to education bycontrast also accounts for progressive tax payments from thisgreater 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 anindividual spends time studying instead of earning money fromentering the job market right away.

yield on education by IAB

(source: IAB)

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