Education and human capital

Education shows great resilience to shocks—labor demand for highly skilled workers has remained high in all kinds of economic conditions. Public policy for education and human capital include increasing the economic and social returns on education, fostering greater educational attainment, encouraging social and economic mobility, and providing vocational education, training, and lifelong learning.

Subject Editor

Ian Walker Lancaster University Management School, UK, and IZA, Germany

Associate Editor(s)

Lorraine Dearden Institute for Fiscal Studies, London, UK, and IZA, Germany

Colm P. Harmon University of Sydney, Australia, and IZA, Germany

Stephen Machin University College London, UK, and IZA, Germany

Daniel I. Rees University of Colorado Denver, USA, and IZA, Germany

  • Articles

  • Opinions

Intergenerational return to human capital

Better educated parents invest more time and money in their children, who are more successful in the labor market

10.15185/izawol.19 19 Devereux, P

by Paul J. Devereux

Governments invest a lot of money in education, so it is important to understand the benefits of this spending. One essential aspect is that education can potentially make people better parents and thus improve the educational and employment outcomes of their children. Interventions that encourage the educational attainment of children from poorer families will reduce inequality in current and future generations. In addition to purely formal education, much less expensive interventions to improve parenting skills, such as parental involvement programs in schools, may also improve child development.

Do firms benefit from apprenticeship investments?

Why spending on occupational skills can yield economic returns to employers

10.15185/izawol.55 55 Lerman, R

by Robert Lerman

Economists once believed firms do not pay to develop occupational skills that workers could use in other, often competing, firms. Researchers now recognize that most firms benefit from investing in apprenticeship training. Evidence indicates that financial returns to firms vary. Some recoup their investment within the apprenticeship period, while others see their investment pay off only after accounting for reduced turnover, recruitment, and initial training costs. Generally, the first year of apprenticeships involves significant costs, but subsequently, the apprentice’s contributions exceed his/her wages and supervisory costs. Most participating firms view apprenticeships as offering certainty that all workers have the same high level of expertise and ensuring a supply of well-trained workers during sudden increases in demand and to fill leadership positions.

School tracking and intergenerational social mobility

Postponing school tracking can increase social mobility without significant adverse effects on educational achievement

10.15185/izawol.56 56 Pekkarinen, T

by Tuomas Pekkarinen

The goal of school tracking (assigning students to different types of school by ability) is to increase educational efficiency by creating more homogeneous groups of students that are easier to teach. However, there are concerns that, if begun too early in the schooling process, tracking may improve educational attainment at the cost of reduced intergenerational social mobility. Recent empirical evidence finds no evidence of an efficiency–equality trade-off when tracking is postponed.

Do youth mentoring programs change the perspectives and improve the life opportunities of at-risk youth?

While most effects are positive, they tend to be modest and fade over time—in addition, some mentoring programs can backfire

10.15185/izawol.62 62 Rodríguez-Planas, N

by Núria Rodríguez-Planas

Mentoring programs such as Big Brothers Big Sisters of America have been providing positive role models and building social skills for more than a century. However, most formal mentoring programs are relatively novel and researchers have only recently begun to rigorously evaluate their impact on changing at-risk youth’s perspectives and providing opportunities for them to achieve better life outcomes. While a variety of mentoring and counseling programs have emerged around the world in recent years, knowledge of their effectiveness remains incomplete.

Does substance use affect educational outcomes?

There is little evidence that substance use reduces educational attainment

10.15185/izawol.66 66 Rees, D

by Daniel I. Rees

A non-trivial portion of traffic fatalities involve alcohol or illicit drugs. But does the use of alcohol and illegal substances—which is linked to depression, suicide, and criminal activity—also reduce academic performance? Recent studies suggest that drinking alcohol has a negative, if modest, effect on grades, and although students who use illegal substances are more likely to drop out of school than those who do not, this may reflect the influence of other, difficult-to- measure factors at the individual level, such as personality.

How to attract foreign students

International student mobility can be good for migrating students, their home country, the host country, and those remaining at home

10.15185/izawol.36 36 Chevalier, A

by Arnaud Chevalier

To expand the skilled workforce, countries need to attract skilled migrants. One way of doing this is by attracting and retaining international students. Empirical evidence suggests that concerns about brain drain—that is, the emigration of highly qualified workers—are overblown and that student migration can positively affect economic growth in both sending and receiving countries. However, migrants themselves reap most of the gains, through higher earnings. So that in the end, international student mobility can be beneficial for all participants: migrating students and those who remain at home, as well as home and host societies.

Human capital effects of marriage payments

Investing in female human capital can reduce brideprice and dowry practices and increase welfare

10.15185/izawol.77 77 Anderson, S

by Siwan Anderson

Payments at the time of marriage, which are ubiquitous in developing countries, can be substantial enough to impoverish parents. Brideprice and dowry have both been linked to domestic violence against women, and inflation in these payments has prompted legislation against them in several jurisdictions. Marriage payments are often a substitute for investment in female human capital, so from a welfare and policy perspective, they should be prohibited. This highlights the importance of promoting direct economic returns over legal and customary rights.

Is the return to education the same for everybody?

While a four-year college degree is financially beneficial for most people, it is not necessarily the best option for everyone

10.15185/izawol.92 92 Webber, D

by Douglas Webber

A postsecondary degree is often held up as the one sure path to financial success. But is that true regardless of institutional quality, discipline studied, or individual characteristics? Is a college degree always worth the cost? Students deciding whether to invest in college and what field to study may be making the most important financial decision of their lives. The return to education varies greatly by institutional quality, discipline, and individual characteristics. Estimating the returns for as many options as possible, and making that information as transparent as possible, are paramount in helping prospective students make the best decision.

Overeducation, skill mismatches, and labor market outcomes for college graduates

Overskilling or overskilling plus overeducation are more likely than overeducation alone to harm employee welfare

10.15185/izawol.88 88 Sloane, P

by Peter J. Sloane

There is evidence that many college graduates are employed in jobs for which a degree is not required, and in which the skills they learned in college are not being fully used. Most of the literature on educational or skill mismatch is based on cross-sectional data, providing information at just one point in time. Drawing meaningful conclusions about mismatch, its dynamics, and its relationship to wages, job satisfaction, and job mobility requires panel data, which can reach more nuanced conclusions by allowing for individual differences, e.g. choosing a job because it offers compensation.

Youth labor market interventions

Comprehensive programs that focus on skills can reduce unemployment and upgrade skills in OECD countries

10.15185/izawol.106 106 Kluve, J

by Jochen Kluve

Reducing youth unemployment and generating more and better youth employment opportunities are key policy challenges worldwide. Active labor market programs for disadvantaged youth may be an effective tool in such cases, but the results have often been disappointing in Organisation for Economic Co-operation and Development (OECD) countries. The key to a successful youth intervention program is comprehensiveness, comprising multiple targeted components, including job-search assistance, counseling, training, and placement services. Such programs can be expensive, however, which underscores the need to focus on education policy and earlier interventions in the education system.

University study abroad and graduates’ employability

There is a positive association between study abroad and graduates’ job prospects

10.15185/izawol.109 109 Di Pietro, G

by Giorgio Di Pietro

In recent decades, the number of university students worldwide who have received some part of their education abroad has been rising rapidly. Despite the popularity of international student exchange programs, however, debate continues over what students gain from this experience. A major advantage claimed for study abroad programs is that they can enhance employability by providing graduates with the skills and experience employers look for. These programs also increase the probability that graduates will work abroad, and so may especially benefit students willing to pursue an international career. However, most of the evidence is qualitative and based on small samples.

Does vocational training help young people find a (good) job?

Systems combining structured learning on the job with classroom training can ease youth unemployment

10.15185/izawol.112 112 Eichhorst, W

by Werner Eichhorst

Youth unemployment has increased in many industrialized countries following the recent global recession. However, this reflects not only the cyclical shock, but also the crucial role of institutions in structuring the transition from school to work. Vocational training, in particular in a dual form combining vocational schooling and structured learning on-the-job, is often considered to be one of the most important policy solutions in combating youth unemployment. The evidence available supports this perception, but the institutional requirements of a successful training system also have to be taken into account from a policy perspective.

The promises and pitfalls of universal early education

Universal early education can be beneficial, and more so for the poor, but quality matters

10.15185/izawol.116 116 Cascio, E

by Elizabeth U. Cascio

There is widespread interest in universal early education, both to promote child development and to support maternal employment. Positive long-term findings from small-scale early education interventions for low-income children in the US have greatly influenced the public discussion. However, such findings may be of limited value for policymakers considering larger-scale, more widely accessible programs. Instead, the best insight into the potential impacts of universal early education comes from analysis of these programs themselves, operating at scale. This growing research base suggests that universal early education can benefit both children and families, but quality matters.

Is training effective for older workers?

Training programs that meet the learning needs of older workers can improve their employability

10.15185/izawol.121 121 Picchio, M

by Matteo Picchio

The labor market position of older workers is cause for concern in many industrialized countries. Rapid population aging is challenging pension systems. The recent economic crisis has forced many older adults out of the workforce, into either pre-retirement or non-employment. Encouraging people to work longer and fostering the employability of older workers have become priorities for policymakers. Training specifically designed for older workers might help attain these goals, since it may refresh human capital and reduce the pay–productivity gap. Training older workers might also benefit employers and society as a whole.

Slavery, racial inequality, and education

Historical slavery may be a driver of human capital and its unequal racial distribution, with implications for education and income inequalities

10.15185/izawol.122 122 Bertocchi, G

by Graziella Bertocchi

Income inequality is a critical issue in both political and public debate. Educational attainment is a key causal factor of continuing inequality, since it influences human capital accumulation and, as a consequence, the unequal distribution of earnings. Educational inequality displays a racial dimension that is particularly persistent and difficult to eradicate through policy measures. Its roots lie in the colonial institution of slave labor, which was widespread in the US and Latin America up until the 19th century. However, the influence of slavery differs significantly across countries and between regions.

Sports, exercise, and labor market outcomes

Increasing participation in sports and exercise can boost productivity and earnings

10.15185/izawol.126 126 Lechner, M

by Michael Lechner

A productive workforce is a key objective of public economic policy. Recent empirical work suggests that increasing individual participation in sports and exercise can be a major force for achieving this goal. The productivity gains and related increase in earnings come on top of the already well-documented public health effects that have so far provided the rationale for the major national and international campaigns to increase individual physical activity. The deciding issue for government policy is whether there are externalities, information asymmetries, or other reasons that lead individuals to decide on activity levels that are too low from a broader social perspective.

Youth sports and the accumulation of human capital

Positive contributions to cognitive and non-cognitive skills justify public support of youth sports

10.15185/izawol.129 129 Leeds, M

by Michael A. Leeds

In response to declining budgets, many school districts in the US have reduced funding for sports. In Europe, parents may respond to difficult economic times by spending less on sports clubs for their children. Such cuts are unwise if participating in sports is an investment good as well as a consumption good and adds to students’ human capital. The value of sports is hard to measure because people who already possess the skills needed to succeed in school and beyond might be more likely to participate in sports. Most studies that account for this endogeneity find that participation in youth sports improves academic and labor market performance.

Do higher levels of education and skills in an area benefit wider society?

Education benefits individuals, but the societal benefits are likely 
even greater

10.15185/izawol.130 130 Winters, J

by John V. Winters

Formal schooling increases earnings and provides other individual benefits. However, societal benefits of education may exceed individual benefits. Research finds that increased average education levels in an area are correlated with higher earnings, even for locals with relatively little education. Science, technology, engineering, and mathematics (STEM) graduates appear to have especially strong external effects, due to their role in stimulating innovation and economic growth. Several strategies to test for causality find human capital externalities do exist.

Impact of bilingual education on student achievement

Language development programs should focus on quality rather than the language in which instruction is provided

10.15185/izawol.131 131 Chin, A

by Aimee Chin

More than 4.4 million students enrolled in US public schools participate in English language learner programs because of linguistic barriers to learning in regular classrooms. Whether native language instruction should be used in these programs is a contentious issue. Recent studies, using credible research designs for estimating causal impacts, find that bilingual education programs (which use some native language instruction) and English-only programs are not significantly different in their impact on standardized test performance. This finding suggests that it is time to change the focus from use of the native language to program quality.

Who benefits from firm-sponsored training?

Firm-sponsored training benefits both workers and firms through higher wages, increased productivity and innovation

10.15185/izawol.145 145 Dostie, B

by Benoit Dostie

Workers participating in firm-sponsored training receive higher wages as a result. But given that firms pay the majority of costs for training, shouldn’t they also benefit? Empirical evidence shows that this is in fact the case. Firm-sponsored training leads to higher productivity levels and increased innovation, both of which benefit the firm. Training can also be complementary to, and enhance, other types of firm investment, particularly in physical capital, such as information and communication technology (ICT), and in organizational capital, such as the implementation of high-performance workplace practices.

Migrants and educational achievement gaps

Avoiding segregation and compensating for parental disadvantage can reduce migrants’ educational achievement gaps

10.15185/izawol.146 146 Entorf, H

by Horst Entorf

As global migration flows increase, so do the number of migrant students in host country schools. Yet migrants’ achievement scores lag well behind those of their native-born schoolmates. Performance gaps are explained largely by differences in migrant parents’ socio-economic background, cultural capital, and language skills. Education policy needs to focus on language teaching, parental involvement, diversity training, and beneficial social interaction between immigrant and native-born populations. With the wealth of many industrialized countries threatened by a lack of qualified labor, education of immigrants should be an important priority.

The quantity–quality fertility–education trade-off

Policies to reduce fertility in developing countries generally boost education levels, but only slightly

10.15185/izawol.143 143 Liu, H

by Haoming Liu

At the national level, it has long been observed that a country’s average education level is negatively associated with its total fertility rate. At the household level, it has also been well documented that children’s education is negatively associated with the number of children in the family. Do these observations imply a causal relationship between the number of children and the average education level (the quantity–quality trade-off)? A clear answer to this question will help both policymakers and researchers evaluate the total benefit of family planning policies, both policies to lower fertility and policies to boost it.

How effective are financial incentives for teachers?

Linking teacher pay to student performance has become popular, but evidence on its effectiveness is mixed

10.15185/izawol.158 158 Imberman, S

by Scott A. Imberman

Concerns about poor student performance have led schools to diverge from traditional teacher compensation and base a portion of pay on student outcomes. In the US, the number of school districts adopting such performance-based financial incentives has increased by more than 40% since 2004. Evidence on individual incentives in developed countries is mixed, with some positive and some negligible impacts. There is less evidence for developing countries, but several studies indicate that incentives can be highly effective and far cheaper to implement. Innovative incentive mechanisms such as incentives based on relative student performance show promise.

The importance of informal learning at work

On-the-job learning is more important for workers’ human capital development than formal training

10.15185/izawol.162 162 De Grip, A

by Andries De Grip

Although early human capital theory recognized the relevance of workers’ experience, its focus was on education and formal training. Recent studies find that much of the performance of newly hired workers is driven by learning by doing or learning from peers or supervisors in the workplace. Descriptive data show that workers learn a lot from the various tasks they perform on the job. Informal learning at work seems to be relevant for all age groups, although it drives more of the performance of younger workers. Informal learning is far more important for workers’ human capital development than formal training courses.

The boom in university graduates and the risk of underemployment

Better information on university quality may reduce underemployment and overeducation in developing countries

10.15185/izawol.165 165 Yamada, G

by Gustavo A. Yamada

As the number of secondary school graduates rises, many developing countries expand the supply of public and private universities or face pressure to do so. However, several factors point to the need for caution, including weak job markets, low-quality university programs, and job–education mismatches. More university graduates in this context could exacerbate unemployment, underemployment, and overeducation of professionals. Whether governments should regulate the quantity or quality of university programs, however, depends on the specific combination of factors in each country.

The impacts of shortening secondary school duration

Shortening secondary school duration may increase the skilled workforce in aging societies

10.15185/izawol.166 166 Thomsen, S

by Stephan L. Thomsen

The main goal of secondary school education in developed countries is to prepare students for higher education and the labor market. That demands high investments in study duration and specialized fields to meet rising skill requirements. However, these demands for more education are in opposition to calls for early entry to the labor market, to lengthen working lives to meet the rising costs associated with an aging population and to enable the intergenerational transfer of skills. One way to lengthen working lives is to shorten the duration of secondary school, an option recently implemented in Canada and Germany. The empirical evidence shows mixed effects.

The educational effects of school start times

Delaying secondary school start times can be a cost-effective policy to improve students’ grades and test scores

10.15185/izawol.181 181 Shapiro, T

by Teny Maghakian Shapiro

The combination of changing sleep patterns in adolescence and early school start times leaves secondary school classrooms filled with sleep-deprived students. Evidence is growing that having adolescents start school later in the morning improves grades and emotional well-being, and even reduces car accidents. Opponents cite costly adjustments to bussing schedules and decreased time after school for jobs, sports, or other activities as reasons to retain the status quo. While changing school start times is not a costless policy, it is one of the easiest to implement and least expensive ways of improving academic achievement.

University dropouts and labor market success

Dropping out of university can be more advantageous than not having enrolled in university at all

10.15185/izawol.182 182 Schnepf, S

by Sylke V. Schnepf

With university education continuing to expand worldwide, university dropouts will make up a large group in future labor markets. Dropping out is routinely viewed as a negative indicator. However, data on university dropouts does not generally provide information on their labor market outcomes, so empirical evidence is sparse. The studies that have examined the issue show that dropping out can be more of an advantage than not having enrolled in university at all. Many dropouts are more likely than upper secondary school graduates with no university education to progress in their careers. And many graduate later in their life.

Class size: Does it matter for student achievement?

Smaller classes are often associated with increased achievement, but the evidence is far from universal

10.15185/izawol.190 190 Jepsen, C

by Christopher Jepsen

Numerous economic studies have considered the relationship between class size and student achievement, the majority of which have focused on elementary schools in the US and Europe. While the general finding is that smaller classes are associated with increased student achievement, a few high-quality studies find no relationship. Further, empirical research on the costs and benefits of smaller classes concludes that other education policies, such as tutoring, early childhood programs, or improving teacher quality would be better investments.

Immigrants in the classroom and effects on native children

Having immigrant children in the classroom may sometimes, but not always, harm educational outcomes of native children

10.15185/izawol.194 194 Jensen, P

by Peter Jensen

Many countries are experiencing increasing inflows of immigrant students. This raises concerns that having a large share of students for whom the host country language is not their first language may have detrimental effects on the educational outcomes of native children. However, the evidence is mixed, with some studies finding negative effects, and others finding no effects. Whether higher concentrations of immigrant students have an effect on native students differs across countries according to factors such as organization of the school system and immigrants’ socio-economic background.

Evaluating the efficiency of public services

Differences in efficiency in public services can offer clues about good practice

10.15185/izawol.196 196 Johnes, G

by Geraint Johnes

Efficiency is an important consideration for those who manage public services. Costs vary with output and with a variety of other factors. In the case of higher education, for example, factors include quality, student demographics, the scale and scope of the higher education provider, and the size and character of the real estate. But even when taking all these factors into account, costs vary across providers because of differences in efficiency. Such differences offer clues about good practice that can lead to improvements in the system as a whole. The role of efficiency is illustrated by reference to higher education institutions in England.

Trade, foreign investment, and wage inequality in developing countries

Exposure to foreign trade raises the skill premium in countries with a large stock of educated workers and reduces it in others

10.15185/izawol.193 193 Cigno, A

by Alessandro Cigno

Liberalization of foreign trade and investment raises the domestic ratio of skilled to unskilled wages (skill premium) if the country has a sufficiently well-educated workforce, but lowers it otherwise. Wide wage inequality is undesirable on equity grounds, especially in poor countries where the bottom wage is close to the breadline; but it gives parents an incentive to invest in their children’s education. The incentive will be ineffective, however, if parents cannot borrow for their child’s education because of underdeveloped credit markets or because they are too poor to finance the investment from their own income and savings.

The value of language skills

A common language facilitates communication and economic efficiency, but linguistic diversity has economic and cultural value too

10.15185/izawol.205 205 Grenier, G

by Gilles Grenier

In today’s globalized world, people are increasingly mobile and often need to communicate across different languages. Learning a new language is an investment in human capital. Migrants must learn the language of their destination country, but even non-migrants must often learn other languages if their work involves communicating with foreigners. Economic studies have shown that fluency in a dominant language is important to economic success and increases economic efficiency. However, maintaining linguistic diversity also has value since language is also an expression of people’s culture.

Early-life medical care and human capital accumulation

Medical care and public health interventions in early childhood may improve human capital accumulation as well as child health

10.15185/izawol.217 217 Daysal, N

by N. Meltem Daysal

Ample empirical evidence links adverse conditions during early childhood (the period from conception to age five) to worse health outcomes and lower academic achievement in adulthood. Can early-life medical care and public health interventions ameliorate these effects? Recent research suggests that both types of interventions may benefit not only child health but also long-term educational outcomes. In addition, early-life medical interventions may improve the educational outcomes of siblings. These findings can be used to design policies that improve long-term outcomes and reduce economic inequality.

The role of preschool in reducing inequality

Preschool improves child outcomes, especially for disadvantaged children

10.15185/izawol.219 219 Waldfogel, J

by Jane Waldfogel

Children from disadvantaged families have lower levels of school readiness when they enter school than do children from more advantaged families. Many countries have tried to reduce this inequality through publicly provided preschool. Evidence on the potential of these programs to reduce inequality in child development is now quite strong. Long-term studies of large publicly funded programs in Europe and Latin America, and newer studies on state and local prekindergarten programs implemented more recently in the US, find that the programs do improve outcomes for young children, particularly for those from disadvantaged families.

Skill mismatch and overeducation in transition economies

Substantial skill shortages coexist with overeducation, affecting both young and old workers

10.15185/izawol.224 224 Kupets, O

by Olga Kupets

Large imbalances between the supply and demand for skills in transition economies are driven by rapid economic restructuring, misalignment of the education system with labor market needs, and underdeveloped adult education and training systems. The costs of mismatches can be large and long-lasting for workers, firms, and economies, with long periods of overeducation implying a loss of human capital for individuals and ineffective use of resources for the economy. To make informed decisions, policymakers need to understand how different types of workers and firms are affected by overeducation and skill shortages.

What is the economic value of literacy and numeracy?

Basic skills in literacy and numeracy are essential for success in the labor market

10.15185/izawol.229 229 Vignoles, A

by Anna Vignoles

Even in OECD countries, where an increasing proportion of the workforce has a university degree, the value of basic skills in literacy and numeracy remains high. Indeed, in some countries the return for such skills, in the form of higher wages, is sufficiently large to suggest that they are in high demand and that there is a relative scarcity. Policymakers need robust evidence in order to devise interventions that genuinely improve basic skills, not just of new school leavers entering the market, but also of the existing workforce. This would lead to significant improvements in the population that achieves a minimum level of literacy and numeracy.

Parental employment and children’s academic achievement

Quality of parental time spent with children is more important than quantity

10.15185/izawol.231 231 Schildberg-Hörisch, H

by Hannah Schildberg-Hörisch

Female labor market participation rates have increased substantially in many countries over the last decades, especially those of mothers with young children. This trend has triggered an intense debate about its implications for children’s well-being and long-term educational outcomes. The overall effect of maternal and paternal employment on children’s cognitive and educational attainment is not obvious: on the one hand, children may benefit from higher levels of family income, on the other hand, parental employment reduces the amount of time parents spend with their children.

Income contingent loans in higher education financing

Internationally, there has been a student financing revolution towards income contingent loans

10.15185/izawol.227 227 Chapman, B

by Bruce Chapman

Around nine countries currently use a national income contingent loan (ICL) scheme for higher education tuition using the income tax system. Increased international interest in ICL validates an examination of its costs and benefits relative to the traditional financing system, government-guaranteed bank loans (GGBLs). Bank-type loans exhibit poor economic characteristics: namely, repayment hardships for the disadvantaged, and default. This damages credit reputations and can be associated with high taxpayer subsidies. ICLs avoid these problems, but effective collection of debt requires a sophisticated mechanism.

Female education and its impact on fertility

The relationship is more complex than one may think

10.15185/izawol.228 228 Kim, J

by Jungho Kim

The negative correlation between women’s education and fertility is strongly observed across regions and time; however, its interpretation is unclear. Women’s education level could affect fertility through its impact on women’s health and their physical capacity to give birth, children’s health, the number of children desired, and women’s ability to control birth and knowledge of different birth control methods. Each of these mechanisms depends on the individual, institutional, and country circumstances experienced. Their relative importance may change along a country’s economic development process.

Do skills matter for wage inequality?

Policies to tackle wage inequality should focus on skills alongside reform of labor market institutions

10.15185/izawol.232 232 Broecke, S

by Stijn Broecke

Policymakers in many OECD countries are increasingly concerned about high and rising inequality. Much of the evidence (as far back as Adam Smith’s The Wealth of Nations) points to the importance of skills in tackling wage inequality. Yet a recent strand of the research argues that (cognitive) skills explain little of the cross-country differences in wage inequality. Does this challenge the received wisdom on the relationship between skills and wage inequality? No, because this recent research fails to account for the fact that the price of skill (and thus wage inequality) is determined to a large extent by the match of skill supply and demand.

University autonomy: Improving educational output

Universities deliver more competent graduates and higher quality research if they are more autonomous and well-funded

10.15185/izawol.240 240 Ritzen, J

by Jo Ritzen

University autonomy and funding is an important aspect in university-level education due to its impact on graduates’ competencies, and on the quality and quantity of research produced. Political factors influence the amount of autonomy allotted to public universities in specific countries. There is sufficient evidence to suggest that an increase in autonomy for universities would provide better educational outcomes and have a direct impact on labor market productivity. However, the debate on autonomy has been overshadowed by discussions on tuition fees and student aid in political circles.

Age at school entry: How old is old enough?

A child’s age at school entry matters, and the implications of policy changes can have long-lasting effects

10.15185/izawol.247 247 Dhuey, E

by Elizabeth Dhuey

Laws on age at school entry affect student achievement and often change for a number of reasons. Older students are more mature and ready to learn. This can have positive impacts on academic, employment, and earnings outcomes. The costs of holding children back include another year of childcare expenses or income forgone by the caregiver parent. Entering the workforce one year later also has implications for lifetime earnings and remittances to governments. School-entry policies could be a useful tool in increasing student achievement, but the short- and long-term impacts need to be better understood.

How can temporary work agencies provide more training?

Staffing agencies could play a more prominent role in the provision of training for the low qualified and previously unemployed

10.15185/izawol.251 251 Spermann, A

by Alexander Spermann

Temporary work agencies use training as a recruitment and retention argument when qualified labor is scarce. However, short job assignments present a major obstacle for employers and employees to increase investment in training. As temporary agency workers are mainly low-qualified and often previously unemployed, paid work in combination with training should lead to more sustainable employment. Adjustments in labor market institutions could make the provision of training more attractive for both staffing agencies and temporary agency workers.

Performance measures and worker productivity

Choosing the right performance measures can inform and improve decision-making in policy and management

10.15185/izawol.260 260 Sauermann, J

by Jan Sauermann

Measuring workers’ productivity is important for public policy and private-sector decision-making. Due to a lack of reliable methods to determine workers’ productivity, firms often use specific performance measures, such as how different incentives affect employees’ behavior. The public sector also uses these measures to monitor and evaluate personnel, such as teachers. To select the right performance measures, and as a result design better employment contracts and improve productivity, policymakers and managers need to understand the advantages and disadvantages of the available metrics.

Income inequality and social origins

Promoting intergenerational mobility can make societies more egalitarian

10.15185/izawol.261 261 Cappellari, L

by Lorenzo Cappellari

Income inequality has been rising in many countries. Is this bad? One way to decide is to look at the change in incomes across generations (intergenerational mobility) and, more generally, at the extent to which income differences among individuals are traceable to their social origins. Inequalities that reflect factors largely out of one’s control—such as local schools and communities—require attention in order to reduce income inequality. Evidence shows a negative association between income inequality and intergenerational mobility. The debate on whether community effects exert additional effects is still open.

Can higher education reduce inequality in developing countries?

Expanding higher education might solve rising youth unemployment and widening inequality in Africa

10.15185/izawol.273 273 Shimeles, A

by Abebe Shimeles

Developing countries often face two well-known structural problems: high youth unemployment and high inequality. In recent decades, policymakers have increased the share of government spending on education in developing countries to address both of these issues. The empirical literature offers mixed results on which type of education is most suitable to improve gainful employment and reduce inequality: is it primary, secondary, or tertiary education? Investigating recent literature on the returns to education in selected developing countries in Africa can help to answer this question.

The dynamics of training programs for the unemployed

Job-search training and occupational skills training are both effective

10.15185/izawol.277 277 Osikominu, A

by Aderonke Osikominu

Time plays an important role in both the design and interpretation of evaluation studies of training programs. While the start and duration of a training program are closely linked to the evolution of job opportunities, the impact of training programs in the short and longer term changes over time. Neglecting these “dynamics” could lead to an unduly negative assessment of the effects of certain training schemes. Therefore, a better understanding of the dynamic relationship between different types of training and their respective labor market outcomes is essential for a better design and interpretation of evaluation studies.

Estimating the return to schooling using the Mincer equation

The Mincer equation gives comparable estimates of the average monetary returns of one additional year of education

10.15185/izawol.278 278 Patrinos, H

by Harry Anthony Patrinos

The Mincer equation—arguably the most widely used in empirical work—can be used to explain a host of economic, and even non-economic, phenomena. One such application involves explaining (and estimating) employment earnings as a function of schooling and labor market experience. The Mincer equation provides estimates of the average monetary returns of one additional year of education. This information is important for policymakers who must decide on education spending, prioritization of schooling levels, and education financing programs such as student loans.

Do youths graduating in a recession incur permanent losses?

Penalties may last ten years or more, especially for high-educated youth and in rigid labor markets

10.15185/izawol.281 281 Cockx, B

by Bart Cockx

The Great Recession that began in 2008–2009 dramatically increased youth unemployment. But did it have long-lasting, adverse effects on the careers of youths? Are cohorts that graduate during a recession doomed to fall permanently behind those that graduate at other times? Are the impacts different for low- and high-educated individuals? If recessions impose penalties that persist over time, then more government outlays are justified to stabilize economic activity. Scientific evidence from a variety of countries shows that rigid labor markets can reinforce the persistence of these setbacks, which has important policy implications.

Can cash transfers reduce child labor?

Cash transfers can reduce child labor if structured well and if they account for the reasons children work

10.15185/izawol.293 293 Rosati, F

by Furio C. Rosati

Cash transfers are a popular and successful means of tackling household vulnerability and promoting human capital investment. They can also reduce child labor, especially when it is a response to household vulnerability. But if not properly designed, cash transfers that promote children’s education can increase their economic activities in order to pay the additional costs of schooling. The efficacy of cash transfers may also be reduced if the transfers enable investment in productive assets that boost the returns to child labor. The impact of cash transfers must thus be assessed as part of the entire social protection system.

How manipulating test scores affects school accountability and student achievement

Standardized testing can create incentives to manipulate test results and generate misleading indicators for public policy

10.15185/izawol.295 295 Battistin, E

by Erich Battistin

Standardized testing has become the accepted means of measuring a school’s quality. However, the associated rise in test-based accountability creates incentives for schools, teachers, and students to manipulate test scores. Illicit behavior may also occur in institutional settings where performance standards are weak. These issues are important because inaccurate measurement of student achievement leads to poor or ineffective policy conclusions. The consequences of mismeasured student achievement for policy conclusions have been documented in many institutional contexts in Europe and North America, and guidelines can be devised for the future.

Family structure and children’s educational attainment in transition economies

Access to education has been hampered by economic and family shocks in south-east Europe and countries of the former Soviet Union

10.15185/izawol.303 303 Mangiavacchi, L

by Lucia Mangiavacchi

Compared to developing economies, European transition economies had high levels of human capital when their transitions began, but a lack of resources and policies to protect poor families hampered children’s access to education, especially for non-compulsory school grades. Different phenomena associated with transition also negatively affected children’s education: e.g. parental absence due to migration, health problems, and alcohol abuse. These findings call for a greater policy focus on education and for monitoring of the schooling progress of children in special family circumstances.

How do adult returns to schooling affect children’s enrollment?

Raising future expected monetary gains to schooling and poor families’ current incomes promotes school enrollment in developing countries

10.15185/izawol.305 305 Swinnerton, K

by Kenneth A. Swinnerton

Universal completion of secondary education by 2030 is among the targets set by the United Nations’ Sustainable Development Goals. Higher expected adult wages traced to schooling may play a major role in reaching this target as they are predicted to induce increased school enrollment for children whose families wish to optimally invest in their children’s future. However, low incomes and the obligation to meet immediate needs may forestall such investment. Studies suggest that school enrollment in developing countries is positively correlated with higher expected future wages, but poor families continue to under-enroll their children.

Do schooling reforms improve long-term health?

It is difficult to find consistent evidence that schooling reforms provide health benefits

10.15185/izawol.306 306 Madden, D

by David Madden

A statistical association between more education and better health outcomes has long been observed, but in the absence of experimental data researchers have struggled to find a causal effect. Schooling reforms such as raising school leaving age, which have been enacted in many countries, can be viewed as a form of natural experiment and provide a possible method of identifying such an effect. However, the balance of evidence so far is that these reforms have had little impact on long-term health. Thus, policymakers should be cautious before anticipating a health effect when introducing reforms of this nature.

Can universal preschool increase the labor supply of mothers?

The success of universal preschool education depends crucially on the policy parameters and specific country context

10.15185/izawol.312 312 Cattan, S

by Sarah Cattan

Since the 1970s, many countries have established free or highly subsidized education for all preschool children in the hope of improving children’s learning and socio-economic life chances and encouraging mothers to join the labor force. Evaluations reveal that these policies can increase maternal employment in the short term and may continue to do so even after the child is no longer in preschool by enabling mothers to gain more job skills and increase their attachment to the labor force. However, their effectiveness depends on the policy design, the country context, and the characteristics of mothers of preschoolers.

What effect do vocational training vouchers have on the unemployed?

Vouchers can create a market for training but may lengthen participants’ unemployment duration

10.15185/izawol.316 316 Strittmatter, A

by Anthony Strittmatter

The objective of providing vocational training for the unemployed is to increase their chances of re-employment and human capital accumulation. In comparison to mandatory course assignment by case workers, the awarding of vouchers increases recipients’ freedom to choose between different courses and makes non-redemption a possibility. In addition, vouchers may introduce market mechanisms between training providers. However, empirical evidence suggests that voucher allocation mechanisms prolong the unemployment duration of training participants. But, after an initial period of deterioration, better long-term employment opportunities are possible.

How important is career information and advice?

Students’ decisions about their education can be, but are not always, improved by providing them with more information

10.15185/izawol.317 317 McNally, S

by Sandra McNally

The quantity and quality of educational investment matter for labor market outcomes such as earnings and employment. Yet, not everyone knows this, and navigating the education system can be extremely complex both for students and their parents. A growing economic literature has begun to test whether interventions designed to improve information about the costs and benefits of education and application processes have an effect on students’ behavior. So far, findings have been mixed, although the positive findings arising from some very carefully targeted interventions give cause for hope.

Skills or jobs: Which comes first?

Jobs require skills, but they also build skills and create a demand for them

10.15185/izawol.339 339 Hentschel, J

by Jesko Hentschel

Skills are widely regarded as being necessary for boosting productivity, stimulating innovation, and creating new jobs, while skill mismatches are often cited as being responsible for a lack of dynamism in the labor market. However, heavy investments in technical and vocational training programs are seldom a “silver bullet.” Recent evidence on skill building not only points to the core importance of foundational skills (both cognitive and social) for success in the labor market, but also emphasizes how jobs themselves can lead to learning and shape social competencies that, in turn, ignite innovation and create more jobs.

Are smaller classes better?

by Christopher Jepsen

A strongly held conviction in education research is that smaller class sizes are better for students. Surely a teacher can be more effective in a classroom with 20 students than in one with 30 student...

Impatience, schooling, and happiness

by Brian C. Cadena

Living and working in the modern world requires continually making difficult decisions about how to trade off hard work in the present for rewards in the future. Adolescents and young adults in partic...

Does education prepare you for working life?

by Klaus F. Zimmermann

As new school and university semesters are beginning in many regions, thoughts turn to the importance of education and how effectively it prepares young people for working life. Education’s main...

6 key points on European youth unemployment

by Werner Eichhorst

To mark International Youth Day, the IZA’s Director of Labor Policy for Europe Werner Eichhorst explains six of the key issues concerning the current levels of youth unemployment in Europe, and ...

Let the children play

by Michael A. Leeds

The world we live in seems to conspire against fun. Ever-tightening school budgets force out non-academic subjects such as music, art, and athletics. At the same time, ambitious parents discourage any...