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.
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.
Teacher effectiveness has a dramatic effect on
student outcomes—how can it be increased?
Teacher effectiveness is the most important
component of the education process within schools for pupil attainment. One
estimate suggests that, in the US, replacing the least effective 8% of
teachers with average teachers has a present value of $100 trillion.
Researchers have a reasonable understanding of how to measure teacher
effectiveness; but the next step, understanding the best ways to raise it,
is where the research frontier now lies. Two areas in particular appear to
hold the greatest promise: reforming hiring practices and contracts, and
reforming teacher training and development.
There is a positive association between study
abroad and graduates’ job prospects, though it is unclear if the link is
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 actually
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 are also
expected to 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.
Public education tends to crowd out parents’
time and money, but careful policy design may mitigate this
Many countries around the world are making
substantial and increasing public investments in children by providing
resources for schooling from early years through to adolescence. Recent
research has looked at how parents respond to children’s schooling
opportunities, highlighting that public inputs can alternatively encourage
or crowd out parental inputs. Most evidence finds that parents reduce their
own efforts as schooling improves, dampening the efficiency of government
expenditure. Policymakers may thus want to focus government provision on
schooling inputs that are less easily substituted.
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.
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.
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
Education benefits individuals, but the societal benefits are
likely even greater
Formal schooling increases earnings and provides other
individual benefits. However, societal benefits of education may exceed individual benefits.
Research finds that higher average education levels in an area are correlated with higher
earnings, even for local residents with minimal education. Science, technology, engineering,
and mathematics (STEM) graduates appear to generate 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.
Cognitive skills are more relevant in explaining earnings,
socio-emotional skills in determining labor supply and schooling
Common proxies, such as years of education, have been shown to
be ineffective at capturing cross-country differences in skills acquisition, as well as the
role they play in the labor market. A large body of research shows that direct measures of
skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of
individuals’ differences in potential productive capacity than the quantity of education they
receive. Evidence shows that cognitive skills in particular are quite relevant to explain
wages, while socio-emotional skills are more associated with labor force and education