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Course non-completion and multiple qualifications: re-estimating the returns to education in Australia

Author

Listed:
  • Austen Peters

    (Bankwest Curtin Economics Centre)

  • Alfred M. Dockery

    (Bankwest Curtin Economics Centre)

  • Sherry bawa

    (Curtin University)

Abstract

Among Australian studies estimating returns to education, there is a consensus that education is a highly profitable investment. Conventional estimates of returns to education examine earnings conditional upon individuals’ years of education, with years spent in education typically inferred from their highest qualification attained. However, this approach underestimates the actual time individuals may have spent in education as it ignores multiple qualifications obtained and time spent towards qualifications that were not completed. Using 2001-2019 panel data from the Household, Income and Labour Dynamics in Australia (HILDA) survey supplemented by several Australian Bureau of Statistics sources, we estimate the sensitivity of estimates of the returns to education from a standard wage equation to the inclusion of course non-completion and multiple qualifications. Taking account of these sources of mismeasurement, we estimate the wage premium associated with each additional year of education to be 5.5 per cent, as opposed to 6.5 per cent using the conventional approach, or around 15 per cent lower. These differences are similar by gender and broad age group. We find unaccounted for years spent accruing multiple qualifications to be the main source of overestimation of the returns to education, although we note the lack of individual-level data on incomplete qualifications may have mitigated against identifying a larger effect of accounting for this source of mismeasurement.

Suggested Citation

  • Austen Peters & Alfred M. Dockery & Sherry bawa, 2022. "Course non-completion and multiple qualifications: re-estimating the returns to education in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 25(1), pages 55-80.
    • Handle: RePEc:ozl:journl:v:25:y:2022:i:1:p:55-80
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    References listed on IDEAS

    as
    1. George Psacharopoulos & Harry Anthony Patrinos, 2018. "Returns to investment in education: a decennial review of the global literature," Education Economics, Taylor & Francis Journals, vol. 26(5), pages 445-458, September.
    2. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5.
    3. Zeidenberg, Matthew & Scott, Marc & Belfield, Clive, 2015. "What about the non-completers? The labor market returns to progress in community college," Economics of Education Review, Elsevier, vol. 49(C), pages 142-156.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Leigh, Andrew, 2024. "Returns to Education in Australia 2001-2022," IZA Discussion Papers 17025, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Education; return to education; human capital theory; non-completion; multiple qualifications; Australia;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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