Indicator A4. What are the earnings advantages from education?

Higher levels of educational attainment carry greater earnings advantages. On average across OECD countries, 25-64 year-old workers with upper secondary or post-secondary non-tertiary attainment earn 29% more than those with only below upper secondary attainment. This earnings premium ranges from below 10% in Estonia and Latvia to above 45% in Brazil, Colombia and Costa Rica (Figure A4.1).

The premium for completing a tertiary degree is much higher. Across the OECD, tertiary-educated workers earn twice as much as those with below upper secondary attainment. Country differences also widen when looking at the relative earnings associated with tertiary attainment. Tertiary-educated workers earn less than 50% more than those with below upper secondary education in Estonia and New Zealand, but the premium can be between twice and just under three times earnings in Brazil, Colombia, Chile and Costa Rica (Figure A4.1).

It is clear that higher educational attainment leads to better earnings, but interpreting relative earnings by educational attainment needs to be done with cautions. First, because earnings benefits are expressed in relative terms, greater educational attainment in countries with low earnings advantages can still provide relatively high absolute benefits. This is the case for the Netherlands and Switzerland, where relative earnings premiums are below the OECD average. However, because wage levels are high, the absolute differences between the earnings of workers with below upper secondary attainment and tertiary attainment in these two countries are among the five highest across the OECD (see Table X3.A4.4 from Annex 3 and Figure A4.1). Second, the relative supply and demand of tertiary-educated workers influences the earnings advantage from education in the labour market. Countries with very high relative earnings for tertiary attainment tend to have a smaller share of tertiary-educated individuals (see Indicator A1). Third, minimum wage laws, the strength of labour unions, the coverage of collective-bargaining agreements, the relative incidence of part-time and seasonal work, and the number of hours worked are likely to affect earnings. Box A4.1 also provides some insights on how adults without tertiary attainment perceive their earnings gap with tertiary-educated workers.

The analysis in this section has provided an overall picture of the earnings advantages from education and covers all adults with earnings from work. The rest of the analysis on relative earnings mainly focuses on full-time full-year workers to ensure better cross-country comparability.

Over the past decade, gains in educational attainment among women have contributed to a worldwide increase in their participation in the labour force (see Indicators A1 and A3). However, in nearly all OECD and partner countries, earnings inequality persists between men and women, with women not earning as much as men.

Although higher levels of educational attainment narrow gender differences in employment rates (see Indicator A3), the gender gap in earnings does not vary much across educational attainment levels. On average across OECD countries, tertiary-educated full-time full-year female workers in 2020 earned only 77% of their male counterparts' earnings, compared to 80% among those with upper secondary or post-secondary non-tertiary attainment, and 79% among those with below upper secondary attainment (Table A4.3). Costa Rica is the only exception where tertiary-educated women working full-time full-year earn slightly more than their male peers. As women are more likely to work part time and/or part year than men, the gender differences in earnings are wider among all workers than among full-time full-year workers (OECD, 2022[1]).

Differences in the choice of field of study between men and women are often considered to be one reason for the gender pay gap for those with a tertiary qualification. For example, men are more likely than women to study in the fields of science, technology, engineering and mathematics (STEM), which are associated with higher earnings, while a larger share of women study fields associated with relatively lower earnings, including education, and arts and humanities (see Indicator B4). However, even when comparing workers with a tertiary degree in the same field of study, women’s work is less well remunerated than men’s (OECD, 2022[1]).

Empirical research has found that, beyond social norms and gender stereotypes, the motherhood penalty seems to be an important contributor to wage differences between men and women in many OECD countries. On average across OECD countries, the wage gap between men and women is narrower for younger full-time full-year workers (25-34 year-olds) than their older peers, regardless of educational attainment (Table A4.3 and (OECD, 2022[1])). Many countries have introduced a mix of policies to bridge the gender pay gap, such as pay transparency laws, non-transferable paternity leave and reductions in the effective marginal tax rates for second earners (Ciminelli, Schwellnus and Stadler, 2021[2]). In recent years, wage differentials between men and women have tended to narrow across OECD countries (OECD, 2022[1]).

The earnings advantage of tertiary-educated workers varies considerably for different levels of tertiary attainment. Due to the large differences in earnings between tertiary-educated workers and those with below upper secondary attainment, the analysis in this section uses earnings for workers with upper secondary attainment as the baseline to better illustrate the relative position of each country.

In most OECD and partner countries, the earnings advantage tends to increase with the level of tertiary attainment. On average across OECD countries, full-time full-year workers with a short-cycle tertiary degree as their highest level of education earned 20% more than those with upper secondary attainment in 2020. The advantage increases to 44% among those with a bachelor’s or equivalent degree and to 88% among those with a master’s or doctoral or equivalent degree (Figure A4.2).

There are some exceptions to this general pattern. Estonia is the only country where full-time full-year workers who attained short-cycle tertiary education earn less than those with upper secondary attainment. However, it is noteworthy that no one has graduated with a short-cycle tertiary degree in Estonia since 2013/14. In Austria, Greece and Norway, the earnings of full-time full-year workers who attained a bachelor’s or equivalent qualification are lower than for those with short-cycle tertiary attainment (Figure A4.2).

The earnings advantage from higher levels of educational attainment tends to increase throughout a person’s working life. In some OECD countries, short-cycle tertiary education is often considered a stepping stone into further learning and holding a short-cycle tertiary degree as the highest level of educational attainment has become less common among younger generations (see Indicator A1 and (OECD, 2022[3])). The analysis in this section compares the earnings advantages across age groups and countries among adults with at least a bachelor’s or equivalent degree compared with adults with upper secondary attainment.

In most countries, earnings increase with age for workers with all levels of educational attainment, but the increase in pay is more pronounced among tertiary-educated workers (Annex 3, Tables X3.A4.4 and A4.5). On average across OECD countries, among full-time full-year workers, younger adults (25-34 year-olds) with at least a bachelor’s or equivalent degree earned 39% more than their peers with upper secondary attainment in 2020. Among 45-54 year-olds, this premium rises to 75% more. Latvia is the only country where younger adults enjoy a higher earnings advantage from at least a bachelor’s or equivalent degree than their older peers. For the other OECD countries, although earnings advantages increase with age, there are sizable differences among countries, ranging from less than 20 percentage points between these two age groups in Denmark, Greece and the United Kingdom to over 50 percentage points in Austria, Costa Rica and Slovenia, and more than 100 percentage points in Chile (Figure A4.3).

The larger earnings advantage for older age groups could be explained by their growing work experience and responsibilities (OECD, 2019[4]). Tertiary attainment is often a prerequisite for moving up the career ladder, and some workers may pursue a tertiary degree after starting their career (see Indicator A7). All these factors contribute to the increasing earnings advantages of tertiary-educated workers over time. Since these advantages are expressed in relative terms, it could also mean that the earnings advantage has fallen for younger generations with the increasing supply of tertiary-educated workers in the labour market. However, between 2013 and 2020, the earnings advantage for younger adults having at least a bachelor’s or equivalent degree has changed by less than 5 percentage points in most OECD countries with available trend data (OECD, 2022[1]). Although these data cover less than a decade, the wage differential in favour of older generations seems to relate more to their seniority at work.

A tertiary degree yields better earnings, but there are substantial differences across fields of study. Among the 17 OECD countries with available data, the combined STEM fields (i.e. science, technology, engineering and mathematics) are most commonly associated with the highest earnings. Only in Austria, Costa Rica and Slovenia do the earnings associated with a tertiary degree in health and welfare exceed the earnings from STEM fields combined. In contrast, degrees in the fields of education and of arts and humanities (except languages), social sciences, journalism and information yield relatively low earnings (Figure A4.4 and Table A4.4).

Disaggregating earnings advantages by narrower fields of study helps to highlight the differences that may exist within a broader field. In the eight OECD countries with available data, although the differences in earnings among the individual STEM fields are quite small except in Luxembourg, there are large differences within the broad field of health and welfare. Full-time full-year workers with a medical or dental degree earn 50% more than those with a degree in nursing or associated health, except in Germany and Latvia. In Norway, workers with a tertiary degree in nursing or associated health fields even earn slightly less than workers with upper secondary attainment (all fields combined). The COVID-19 pandemic is challenging many countries’ health systems and has underscored the lack of healthcare workers. Despite their importance, compared to all other fields of study, the earnings advantage associated with a tertiary degree in nursing or associated health fields is in the bottom three among the eight OECD countries with available data (Table A4.4).

The high earnings associated with some fields of study may relate to a potential mismatch between the supply of current graduates and labour-market needs. With rapid digitalisation, the relatively high earnings associated with an information and communication technologies (ICT) degree may reflect the imbalance between strong labour-market demand for ICT workers and the very small share of graduates who studied this field (see Indicator A1). However, supply and demand could instead be better aligned in the labour market by exploring other types of skills that may be substitutes for an ICT degree. For example, using job posting data, a recent study suggests that tertiary-educated workers with an educational background in engineering or business management seem to have technical skills that are suitable for filling vacancies in some ICT occupations (Brüning and Mangeol, 2020[5]).

Some young adults combine education with some forms of employment, and they receive remuneration from work before graduation (see Indicator A2). On average across OECD countries, 40% of students aged between 15 and 24 have income from employment over a year. There are large variations across countries, ranging from less than 10% in Belgium and Luxembourg to over 70% in Canada, Costa Rica, Denmark, Mexico and Türkiye (OECD, 2022[1]).

The costs of staying in the education system is likely to increase with age and in all OECD countries with available data, 25-29 year-old students are more likely to have paid jobs than 15-24 year-old students. On average across the OECD, 67% of 25-29 year-old students receive income from employment. This may partly be because, as students get older, they may enrol in higher levels of tertiary education; in some countries, tuition fees are higher for master’s or doctoral or equivalent degrees than for lower tertiary programmes (see Indicator C5). It may also be the case that some 25-29 year-olds have already started working and are returning to education while continuing their careers. There is less cross-country variation in the share of working students among 25-29 year-olds than among 15-24 year-olds: the share of older students with income from employment ranges from 31% in Belgium to 90% in Norway (OECD, 2022[1]).

Similar to relative earnings, the likelihood of earning more than the overall median increases with educational attainment. On average across OECD countries, 26% of workers with below upper secondary attainment earn more than the median, compared to 43% of those with upper secondary or post-secondary non-tertiary attainment. This share reaches 68% among workers with tertiary attainment (OECD, 2022[1]).

The differences are more considerable when looking at the share of workers earning more than twice the median. Across OECD countries, an average of 23% of tertiary-educated workers earn more than twice the median, compared to only 7% of those with upper secondary or post-secondary non-tertiary attainment and 3% of those with below upper secondary attainment (Table A4.2).

Among tertiary-educated workers, the distribution of earnings can vary considerably depending on the level of tertiary attainment. In nearly all OECD and partner countries, the share of workers earning more than twice the median increases at each level from short-cycle tertiary, to bachelor’s or equivalent and master’s or doctoral or equivalent degrees. On average across OECD countries, 13% of workers with a short-cycle tertiary degree earn more than twice the median. The share increases to 20% among those with a bachelor’s or equivalent degree and to 33% among those with a master’s or doctoral or equivalent degree (Figure A4.6).

In some countries, the earnings distribution is more skewed than in others. For example, in Chile, Costa Rica and Mexico, the share of tertiary-educated workers earning more than twice the median is at least twice the OECD average (e.g. at least 46% compared to the average of 23%) (Table A4.2). In these countries, the tertiary-educated share of the population is also much lower than the OECD average (see Indicator A1). A strongly skewed earnings distribution among tertiary-educated workers may signal barriers to pursuing higher levels of education among students with disadvantaged socio-economic background.

Adults refer to 25-64 year-olds; younger adults refer to 25-34 year-olds.

Educational attainment refers to the highest level of education successfully completed by an individual.

Fields of study are categorised according to the ISCED Fields of Education and Training (ISCED-F 2013). See the Reader’s Guide for a full listing of the ISCED fields used in this report and Annex 3 for more details.

Levels of education: See the Reader’s Guide at the beginning of this publication for a presentation of all ISCED 2011 levels.

Individuals with zero earnings refer to individuals who have earnings but the result of their business activities is exactly zero.

Individuals with negative earnings refer to individuals who reported deficit in business activities.

The analysis of relative earnings of the population with specific educational attainment and of the distribution of earnings includes full-time and part-time workers. It does not control for hours worked, although the number of hours worked is likely to influence earnings in general and the distribution in particular. The analysis of differences in earnings between men and women includes full-time workers only. For the definition of full-time earnings, countries were asked whether they had applied a self-designated full-time status or a threshold value for the typical number of hours worked per week.

Earnings data are based on an annual, monthly or weekly reference period, depending on the country. This Indicator presents annual data, and earnings data with a reference period shorter than a year are adjusted. Please refer to Table X3.A4.1 in the Annex 3 for more information on the adjustment methods. Data on earnings are before income tax for most countries. Earnings of self-employed people are excluded for many countries and, in general, there is no simple and comparable method to separate earnings from employment and returns to capital invested in a business.

This indicator does not take into consideration the impact of effective income from free government services. Therefore, although incomes could be lower in some countries than in others, the state could be providing both free health care and free schooling, for example.

Data presented at the country level are average earnings, but there can be significant variations for individuals. Data shown in Table A4.2, “Distribution of workers by educational attainment and level of earnings relative to the median earnings (2020)”, illustrate the earnings variations among individuals. Median earnings are for all adults with earnings from work, regardless of educational attainment.

The total average for earnings (men plus women) is not the simple average of the earnings figures for men and women. Instead, it is the average based on earnings of the total population. This overall average weights the average earnings separately for men and women by the share of men and women with different levels of educational attainment.

Category totals for fields of study may not be equivalent to the sum of the subcategories because some programmes cannot be classified into a specific subcategory but are included in the total. In addition, data on humanities (except languages), social sciences, journalism and information refers to the field social sciences, journalism and information only in Australia, Austria, Chile, Luxembourg and the United Kingdom.

In the earnings data, individuals with zero and/or negative earnings should be reported as earners. Individuals with negative earnings should also be taken into account in the calculation of the overall median earnings. However, data on individuals with zero and/or negative earnings are not available for all countries. Individuals with zero earnings are included for Belgium, Canada, Germany, Ireland, New Zealand, Norway, Sweden, Switzerland, Türkiye and the United States. Individuals with negative earnings are included for Belgium, Canada, Denmark, Italy, New Zealand, Norway, Spain, Sweden and the United States. Refer to the Definitions section for the definition of individuals with zero and negative earnings.

The shares of working students are not comparable with the values presented in Indicator A2, due to differences in the reference period, age group and the definition of student status. Please refer to Table X3.A4.2 for more information.

Please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[10]) for more information and Annex 3 for country-specific notes (https://www.oecd.org/education/education-at-a-glance/EAG2022_X3-A.pdf).

This indicator is based on the data collection on education and earnings by the OECD Labour Market and Social Outcomes of Learning Network (LSO Network). The data collection takes account of earnings for individuals working full time and full year, as well as part time or part year, during the reference period. This database contains data on dispersion of earnings from work and on student earnings versus non-student earnings. The source for most countries is national household surveys such as Labour Force Surveys, the European Union Statistics on Income and Living Conditions (EU-SILC), or other dedicated surveys collecting data on earnings. About one-quarter of countries use data from tax or other registers. Please see Annex 3 for country-specific notes on national sources (https://www.oecd.org/education/education-at-a-glance/EAG2022_X3-A.pdf).

References

[5] Brüning, N. and P. Mangeol (2020), What skills do employers seek in graduates?: Using online job posting data to support policy and practice in higher education, OECD Publishing, Paris, https://doi.org/10.1787/bf533d35-en.

[2] Ciminelli, G., C. Schwellnus and B. Stadler (2021), Sticky floors or glass ceilings? The role of human capital, working time flexibility and discrimination in the gender wage gap, OECD Publishing, Paris, https://doi.org/10.1787/02ef3235-en.

[1] OECD (2022), Education at a Glance Database, OECD.Stat website, https://stats.oecd.org (accessed on 17 June 2022).

[3] OECD (2022), Pathways to Professions: Understanding Higher Vocational and Professional Tertiary Education Systems, OECD Reviews of Vocational Education and Training, OECD Publishing, Paris, https://doi.org/10.1787/a81152f4-en.

[8] OECD (2021), Government at a Glance 2021, OECD Publishing, Paris, https://doi.org/10.1787/1c258f55-en.

[6] OECD (2021), Main Findings from the 2020 Risks that Matter Survey, OECD Publishing, Paris, https://doi.org/10.1787/b9e85cf5-en.

[4] OECD (2019), Working Better with Age, Ageing and Employment Policies, OECD Publishing, Paris, https://doi.org/10.1787/c4d4f66a-en.

[10] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.

[7] OECD (2012), Economic Policy Reforms 2012: Going for Growth, OECD Publishing, Paris, https://doi.org/10.1787/growth-2012-en.

[9] Pew Research Center (2020), Most Americans Say There is Too Much Income Inequality in the U.S. but Fewer Than Half Call it a Top Priority, Pew Research Center website, https://www.pewresearch.org/social-trends/2020/01/09/most-americans-say-there-is-too-much-economic-inequality-in-the-u-s-but-fewer-than-half-call-it-a-top-priority/ (accessed on 23 May 2022).

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