Abstract
(Englisch)
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Public funding and private rates of return to education (PURE): The project involved 14 European countries and Switzerland with Finland as the coordinating partner. The project has produced, on a comparable basis, cross-country evidence at a European level on a broad set of policy-relevant issues related to private returns to education. Starting from a comprehensive analysis of individual returns to education across the 15 countries, the project expanded to investigate the interplay between education and work experience, including differences between cohorts; the productivity-enhancing versus the signaling role of education; the interaction between education and wage inequality; the relationship between education and unemployment; the importance of the supply of and the demand for highly educated labor as well as of labor market institutions for individual returns to education; the influence of public funding and enrolment into higher education on educational outcomes; and the structure of student loan systems. Here we summarize the main results, with particular reference to Switzerland.
- Private returns to education vary considerably across Europe, and there are no signs of convergence. For Switzerland in the 1990s, one additional year of schooling results in an increase in the hourly wage rate between 6.5% to 9.5%. This means that the returns to schooling in Switzerland are slightly above EU average. There are no significant differences in these returns between men and women, which is different from the results found for the UK, Ireland, Germany, Greece and Italy. Gender differences in returns to education seem to be lower in countries with a higher female labor market participation rate. Wage expectations found that Swiss students do in fact expect rates of return to education which come quiet close to those estimated in the labor market, underlines the relevance of the results of this project in education policy.
- Further education seems to be associated with a notable wage risk. On the one hand, this might reduce individuals' incentives to invest in higher education. On the other hand, it undermines the common belief that overall wage inequality can be reduced with further education. For Switzerland, as for most other European countries, rates of return to education are found to vary considerably depending on the relative position in the wage distribution. However, education seems to reduce the risk of unemployment. If this risk is taken into account, estimates of rates of return increase in most cases. In Switzerland, however, the low unemployment rates make rates of return less sensitive to the risk of joblessness.
- Higher levels of education as measured by a college degree not only increase market entry wages but also earnings growth over the working life of men and women. In Switzerland, like in the other countries, the college wage gap has been increasing over time. Younger and older cohorts are found to contribute equally to this in Switzerland and in most EU countries, except for Austria, Denmark and the Netherlands.
- In a separate study for Switzerland we find, that the detrimental impact of gender segregation on the wage gap between men and women is significantly lower for higher levels of formal education. More formal education seems to make men and women more similar with respect to productivity-relevant characteristics. Nevertheless, a substantial part of the gender wage gap remains unexplained also for higher levels of education. This points to some scope not only for equal pay policy but also for education policy to reduce the gender wage inequality.
- Using variation across time and European countries public funding, entry exams in the high-school system and tuition fees are detected to strongly influence enrolment into higher education and thus the supply of highly educated labor. In contrast, current returns to education and current unemployment rates for younger age groups seem to leave current enrolment into higher education unaffected. For economic policy most relevant, the positive effect of public funding on enrolment in tertiary education is found for the total of the amount spent. The actual partitioning of these funds into expenses for secondary or tertiary education does not seem to matter. This fact is of special interest to Switzerland as enrolment rates at the tertiary education level (including vocational education) are very low in Switzerland, particularly for women.
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