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A common language facilitates communication
and economic efficiency, but linguistic diversity has economic and cultural
value too
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.
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Basic skills in literacy and numeracy are
essential for success in the labor market
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.
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Students do worse if their abilities fail to
match the requirements of the institutions where they matriculate
A growing body of research has begun to examine
the match between student ability and university quality. Initial research
focused on overmatch—where students are lower attaining than their college
peers. However, more recently, attention has turned to undermatch, where
students attend institutions with lower attaining peers. Both have been
shown to matter for student outcomes; while in theory overmatch could be
desirable, there is evidence that overmatched students are less likely to
graduate college. Undermatched students, meanwhile, have been shown to
experience lower graduate earnings.
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Concerns exist that overeducation damages
employee welfare; however it is overeducation combined with overskilling
that is the real problem
Evidence shows that many college graduates are
employed in jobs for which a degree is not required (overeducation), and in
which the skills they learned in college are not being fully utilized
(overskilling). Policymakers should be particularly concerned about
widespread overskilling, which is likely to be harmful to both the welfare
of employees and the interests of employers as both overeducation and
overskilling can lead to frustration, lower wages, and higher quitting rates
while also being a waste of government money spent on education.
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It is vital to measure language proficiency
well, as it crucially determines immigrants’ earnings
Over recent decades, Western countries have
admitted many immigrants from non-traditional regions (e.g. Philippines,
India, China), which has coincided with poor economic integration. Language
proficiency is an important determinant of economic integration; in addition
to being a component of human capital, it plays a key role in facilitating
the transmission of other components of human capital. Examining the
strengths and weaknesses of objective and subjective measures of language
proficiency is crucial for good integration policy, as is understanding the
relationship between these measures and earnings, a key indicator of
economic integration.
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Better educated parents invest more time and
money in their children, who are more successful in the labor market
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.
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Where STEM immigrants were educated strongly
influences their economic success and possibly their impact on
innovation
Canada, the US, and most Western countries are
looking to STEM (science, technology, engineering, and mathematics)
immigrants to boost innovation and economic growth. Canada in particular has
welcomed many STEM immigrants over the past quarter of a century. In the US,
there is an ongoing debate about whether the H–1B visa program is being used
effectively to attract more STEM immigrants. Interestingly, significant
differences exist between the two countries in earnings and likely the
innovation activity of highly educated immigrants, which highlights the
likely role of immigration policy in determining such outcomes.
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Do structural reforms or educational expansion
drive higher employment and participation rates?
Employment and labor force participation (LFP)
rates have increased throughout Europe since the 1990s, with little
interruption from the Great Recession. While many credit labor market
reforms for this progress, ongoing educational expansion might actually be
more important. This implies that the overall employment rate of an economy
can change if the share of the population with tertiary education increases,
even in the absence of any labor market reforms or effects of the business
cycle. Taking this compositional effect into account makes it possible to
disentangle the impact of reforms.
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Better information on university quality may
reduce underemployment and overeducation in developing countries
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.
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Postponing school tracking can increase social
mobility without significant adverse effects on educational achievement
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.
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