The previous sub-sections made the case that substantive pecuniary and non-pecuniary benefits do attribute to the individual from participation in HE. Nevertheless, society also stands to benefit from an increasingly educated population. For instance, the Exchequer can expect to receive higher tax receipts. Other benefits may include a more productive workforce, higher economic growth, improved public health, reduced criminality, a more civic society and higher intergenerational educational transmission. Specifically, research by OECD (2017) across member countries with data estimates that the total social return of supporting a man and woman in tertiary education is US $208,900 for a man and $135,200 for a woman. Nevertheless, this does come at a cost, as the same report put the total public cost (including both direct and indirect costs) at US $54,900 for a man and $51,800 for a woman. We now review some contributions to the empirical literature with respect to social returns.
Conventional wisdom would suggest that formal education will improve productivity through skill enhancement. Chevalier et al. (2004) test whether education enhances productivity or serves in a signalling capacity. Their test utilises a natural experiment, the 1973 expansion in the compulsory school leaving age from 15 to 16 in the UK, using samples derived from GHS. The aim is to assess the impact of changes in educational incentives with respect to school participation. The authors reason that if education acts as a signal, forcing one group of individuals to participate in an additional year of education, this should cause other groups to invest in additional education to maintain a
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credible signal. Specifically, the authors conduct a Chow test66 for the equality of coefficients between samples of individuals obtaining no qualifications born 1956 to 1958. The impact of raising the school leaving age is also estimated with respect to the probability of achieving specific educational levels. The authors find this is only positively associated with the acquisition of Certificates of Secondary Education (CSEs) for men.
On a similar theme, Sabates (2010) investigates the associations between educational expansion, economic growth and antisocial behaviour using temporal evidence from England. The authors consider a policy initiative, Educational Maintenance Allowance (EMA)67 which was trialled in 15 Local Educational Authorities (LEA) in 1999 and was intended to bolster participation in non-compulsory education for those aged between 16 and 18. The author hypothesises that when educational expansion and economic growth occur together, they will have a multiplicative effect with respect to reducing youth criminality. He explores these associations by utilising youth unemployment data, crime data (sourced from the Home Office Offender’s Index) and a policy initiative (undertaken by the Department for Education and Skills). Differences-in-differences were then computed with respect to fast and slow economic growth for LEA and non- LEA areas, using changes in juvenile conviction rates with area fixed effects. The author’s results indicate that educational expansion appears to reduce youth criminality but find no like-for-like effect with respect to economic growth.
As we outlined earlier, increasing an individual’s schooling has been consistently found to be associated with positive health outcomes. It would therefore follow that better individual health outcomes may lead to reduced hospitalisations for preventable ailments which is costly to society. Behrman et al. (2011) investigate the causal association between schooling, hospitalisation and mortality using linked Danish twin data. Specifically, the authors make use of a longitudinal sample of twins born between 1921
66 The authors also employ additional tests to determine whether the distributions of school
leavers pre- and post-reform are different. These tests include Kolmogorov-Smirnov and Duncan displacement test. The Kolmogorov-Smirnov tests the equality of the distributions pre- and post- reform. Whereas the Duncan displacement test informs on the proportion of one group that would need to shift groups in order to equalise the distributions pre- and post-reforms.
67 EMA was a means-tested and post-compulsory education participation-based allowance
amount paid to individuals up to a maximum of £30 a week (during term time, with achievement bonuses) to increase enrolment in FE in the UK. The programme was brought in by New Labour in 1999 (1997 to 2010) and subsequently replaced with a less well-resourced but more targeted bursary scheme by the Conservative-Liberal Democrat coalition (2010 to 2015).
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and 1950; derived from the Danish Twin Registry,68 supplemented by population-based registers from Statistics Denmark. The study provides within-pair estimates of schooling coefficients for two measures of days hospitalised between 1980 and 2002 and mortality prior to 200369. The authors estimate schooling coefficients for number of days hospitalised using standard and within-twin pair estimates for 5% of the sample, monozygotic and dizygotic twins. Initially, irrespective of cohort (e.g. 1921 to 1935 and 1936 to 1950) and then by gender. The results indicate the existence of strong negative associations with respect to schooling, hospitalisation and mortality.
One often cited potential benefit of education is that a more educated electorate are able to select and vote for more effective leaders. Milligan et al. (2004) utilise changes in the compulsory schooling laws, using an IV approach in the UK and US to model the association between education and civic participation. They test whether an increase in years of education undertaken increases the probability of voting, whilst also examining whether better educated voters are politically more informed and have a higher likelihood of participating in political or community meetings and activities. To conduct the analysis, the authors utilised samples from the US Annual National Election Studies linked to the November Voting Supplements (part of the then current Population Survey), and UK British General Election Studies linked with Barometer Surveys. The results reveal that highly educated individuals are more likely to register higher scores for political and community interest and are more likely to belong to a political group, follow campaigns and discuss politics. The results also show a strong positive correlation between education and voting habits in the US, but not in the UK. The authors attribute this to the influence of more user friendly and assisted registration programs in the latter.
Since the early 1980s, income inequality has increased in most developed countries, despite educational expansion. Formal education is however, seen by many as a way of reducing inequality. Reducing inequality and creating a more equitable distribution of income may yield a number of social benefits, such as increasing trust between citizens,
68 The Danish Twin Registry is one of the oldest registries of its type in the world. The data
contains detailed information on twins born in Denmark from 1870 to the present day.
69 The authors argue that their study is less subject to measurement error than previous studies
for three reasons: first, educational data is sourced from the 1970 census, which is closer to when these were obtained and thus less likely to incur recall errors; second, use of administrative data for 48% of monozygotic twins is presumably measured to very low error; third, measurement error biases resulting from calculating noise-to-signal ratio for the whole sample (excludes that half the sample is drawn from administrative records) are smaller than those of individual estimates.
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reducing crime and creating better public institutions. Martins & Pereria (2004) explore the association between education and wage inequality using largely household survey evidence from 16 countries70. The authors estimate Mincer’s (1974) equation using Becker’s (1975) framework of gross hourly earnings for male full-time workers71. Whilst there are country specific effects, the key stylised fact that emerges from the results is that returns increase over the wage distribution, i.e. returns are higher for those whose unobservable characteristics place them at the top of the conditional wage distribution. This implies that schooling has a positive effect on within-group wage inequality. Therefore, the authors caution against cutting wage inequality by investing in higher schooling because, even if the population was only made up of highly educated individuals, the economy would still exhibit significant levels of wage inequality due to the increased spread in returns.
To summarise, the public sector invests significant amounts of public funds to support individuals through HE. For instance, the OECD (2017) reports that, the total public cost of supporting a man and woman in tertiary education is $54,900 and $51,800. Nevertheless, the same report estimated that the total public benefits are $208,900 and $135,200 for a man and woman respectively. However as rich sources of data are relatively sparse, social returns are hard to quantify. This led us to expand our search to focus on education more generally and research conducted in other countries. Education has also been found to be associated with a range of positive social returns, e.g. lower criminality, rates of hospitalisation, mortality and higher political engagement. We can also be confident from the evidence presented on social returns, that the use of public funds to support individuals through HE is justified. However, education was also found to reduce within-class wage inequality but expanding HE provision can do little to reduce between-class wage inequality.
We can conclude from the returns literature that, despite the rapid increase in HE participation witnessed in the UK, HE still represents a good personal investment, with the graduate wage premium remaining relatively constant. However, evidence does point to a widening in the variance of pecuniary returns with these positively correlated with family background. This would suggest that merely expanding education would do
70 Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, The Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, UK and USA.
71 Data restrictions mean that net earnings are used for Austria, Greece and Italy. Excluding
France and Spain, total wages are divided by total hours. For the former, only yearly gross income was available and this was divided by 1760 hours.
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little to address inequality. Moreover, in addition to education having significant consumption value, education was also found to be associated with significant non- pecuniary benefits. Substantial social benefits also accrue, e.g. higher tax revenue for the exchequer, lower rates of criminality and improved public health.