Returns to Education in Different Labor Market Contexts
Title
Returns to Education in Different Labor Market Contexts
Author
SchöEmann, Klaus
Becker, Rolf
Research Area
Social Institutions
Topic
Educational Institutions
Abstract
Labor market contexts shape the returns to education to a great deal. Beyond the known positive effects of higher education to yield higher returns to education, there is ample evidence that supports the view that labor market institutions shape the returns as well as cohort and period effects. Additional returns to education consist in faster career progression and less frequent early retirement for higher educated employees. Part of the positive returns is the close link of higher education and continuous participation in further education and training, which tends to widen the differences between high investors in education and persons with few qualifications. Occupational and industry sector contexts largely shape such differential learning and work trajectories. Temporary high demand for specific professions such as engineers, medical doctors, or care personnel create cycles of exceptionally high returns to special fields of education, but as soon as the wider economic, demographic, or institutional factors vanish, returns shrink again. Context specific skill mismatches allow above average returns for some professions, whereas they can make fields of education also obsolete. Nonmonetary returns to education such as increases in happiness, subjective well‐being, job security, or health have gained more attention in recent work. Differential returns due to labor market contexts encourage labor market agents to switch between contexts to increase returns. Job mobility, further training, and migration appear to be common strategies to ensure above average monetary and nonmonetary returns to education.