Education: Governments should expand tertiary studies to boost jobs and tax revenues

07/09/2010 - Governments need to go for world-class quality in their education systems to ensure long-term economic growth, according to the latest edition of the OECD’s annual Education at a Glance.

“In a global economy, it is no longer improvement by national standards alone. The best performing education systems internationally provide the benchmark for success,” said OECD Secretary-General Angel Gurría launching the report in Paris.

“With the worldwide recession continuing to weigh on employment levels, education is an essential investment for responding to the changes in technology and demographics that are re-shaping labour markets.”

Recent experience demonstrates the value of investing in education. During the economic downturn, young people with low levels of education were hard hit, with unemployment rates for those that had not completed high school rising by almost five percentage points in OECD countries between 2008 and 2009.

For people with tertiary degrees, by contrast, the increase in unemployment levels during the same period was below two percentage points (Box C3.1).

Change in unemployment rate for the 15-29 year-old population (2008-09)

“Good education increases employability,” Mr. Gurría said. “In countries hit early by the recession, people with lower levels of education had more difficulties finding and keeping a job.”

With demand for tertiary courses rising, according to analysis in this year’s edition of Education at a Glance, public resources invested in university education also pay off handsomely by bringing in additional tax revenues.

On average across OECD countries, a man with a tertiary level of education will generate USD 119 000 more in income taxes and social contributions over his working life than someone with just an upper secondary level of education.

Even after taking account of the cost to the public exchequer of financing degree courses, higher tax revenues and social contributions from people with university degrees make tertiary education a good long-term investment.

Net of the cost of degree courses, the long-term gain to the public exchequer averages USD 86 000 in OECD countries, almost three times the amount of public investment per student in tertiary education. Overall returns are even larger, as many benefits of education are not directly reflected in tax income (Table A8.4).

Education at a Glance provides a rich, comparable and up-to-date array of indicators on the performance of education systems and their implications in policy discussions. The indicators look at who participates in education, what is spent on it, how education systems operate and what results are achieved.

Among other points, the 2010 edition of Education at a Glance reveals that:

• On average across OECD countries, 35% of 25-34 year-olds have completed tertiary education, compared with 20% of 55-64 year-olds. Korea, Canada and Japan are in the lead, along with the Russian Federation, which is a candidate for OECD membership, all with over 50% of 25-34 year olds with tertiary qualifications (Chart A1.1).
  
  
• Unemployment rates among people with a tertiary level of education have stayed at or below 4% on average across OECD countries during the recession. For people who failed to complete upper secondary education, by contrast, unemployment rates have repeatedly exceeded 9% (Table A6.4a).
  
  
• Employers spend nearly twice as much on average in OECD countries to employ an experienced person with tertiary education, compared with a person in the same 45-54 year-old age group who has not completed upper secondary school (Table A10.4).
  
  
• Methods of financing tertiary education vary considerably between countries, with more than 60% of costs covered from private sources in Chile, Japan, Korea, the U.K. and the U.S., compared with less than 10% in Belgium, Denmark, Finland, Iceland and Norway (Table B3.2b).
  
  
• As more and more people look beyond their home countries’ borders for university education, both academic and commercial benefits accrue from attracting foreign students. In 2008, the latest year for which complete figures are available, over 3.3 million tertiary students were enrolled outside their country of citizenship, an increase of 10.7% increase from 2007 (Box C2.1).
  
  
• New players are emerging in an increasingly competitive market for international education. The Russian Federation expanded its market share by two percentage points over the past decade and Australia, Korea and New Zealand each by one percentage point. Over the same period, the share of the U.S. dropped from 26% to 19%, and Germany, the United Kingdom and Belgium also lost ground (Chart C2.3).
  
  
• The largest numbers of international students are from China and India. China accounts for 17% of all international students enrolled in OECD countries (not including an additional 1% from Hong Kong, China), with 21.6% of international students from China going to the U.S. and 15.3% to Japan (Table C2. 7).
  
  
• Women in most countries and at most education levels still earn much less than men, potentially discouraging women from making full use of the skills they have learned and hampering economic growth. On average in OECD countries, a woman aged between 35 and 44 with upper secondary and post-secondary non-tertiary education can expect to earn 76% of male earnings. This ratio falls to 74% for those who have not completed an upper secondary education and to 71% for those who have completed a tertiary education (Table A7.3a).
  
  
• Adults with higher educational attainment are more likely to participate in formal and/or non-formal education than adults with lower attainment. On average for the OECD, individuals with tertiary education have an advantage in the involvement in educational activities – they are almost three times more likely to be involved in educational activities than those with low levels of education (Table A5.1b).
  
  
• Teachers are still paid less than other people with similar educational qualifications in most countries. Only in Spain does a lower secondary teacher with 15 years of experience earn more than the average for people with tertiary education. On average across OECD countries, a teacher at this level can expect to earn 79% of the average. In the Czech Republic, Hungary, Iceland, Israel, Italy and Slovenia, this ratio falls below 60% (Table D3.1).