EDUCATION INDICATOR: An International Perspective

Education and Labor Market Destinations

Preparing students for work is an important objective of formal education systems. From the perspective of both the individual and society, returns in the labor market are a major goal of investment in education. In the United States, as well as in other countries, public policy calls on the education system to address labor market problems. Most recently in the United States, this has been evident in the passage of the School-to-Work Opportunities Act of 1994.

The indicators presented in this section confirm the linkage between education attainment and labor market outcomes and, in fact, reveal that labor market returns for investing in formal education are even more pronounced in the United States than in many other countries. In all of the countries reported, labor market participation increased in conjunction with education (Indicator 15). Furthermore, in the United States as well as in the other countries, the unemployment rate of labor market participants decreased as education level increased (Indicator 19). Finally, education is also an important factor affecting earnings, with more education generally leading to higher earnings (Indicator 17).

In all of the countries reported, labor market participation and average annual earnings of females were below those of males, even when education level was held constant (Indicators 16 and 18). This may be due, at least in part, to he higher incidence of part-time work among females than among males and to sex differences in the total number of years in the labor force. Furthermore, the relationship between education and labor market outcomes was different for males and females, as earnings correlated more strongly to education for females than for males, often resulting in more similar outcomes for males and females with a university education than for those with less education. To illustrate, females received larger returns than males for a university education in about half of the countries reported, including the United States (Indicator 17).

The relationship between education and labor market participation was especially marked for females in most countries, including the United States. As a result, the gap between male and female participation decreased as educational attainment increased (Indicator 16). The same was true for the relationship between education and earnings among young adults (aged 25-34). Average annual earnings of females were closer to the earnings of males for young adults with a university education than for those with less education (Indicator 18). It appears, then, that there is a greater incentive for females to pursue higher levels of education than males since the labor market payoffs (i.e., participation and earnings) for higher levels of education are more pronounced for females than males.

However, for more than half the countries, the labor force participation rate for males with a university education was still from 10 to 15 percentage points higher than the female rate (Indicator 16). In addition, females in all countries continued to earn less than males with the same level of education. Also, among older adults (aged 45-64), education had little relationship to the ratio of mean annual earnings of females to males (Indicator 18).

[Indicator 14]

[Indicator 15]