Social and Private Rates of Return to Investment in Schooling, by Race-Sex Groups and Regions

In this article, social and private rates of return to schooling investment are computed in four race-sex groups (white males, males of other races, white females, and females of other races). Social and private rates of return also are computed for the aggregate of the four race-sex groups within each of four U.S. Census Regions and for the United States as a whole. Adjustments are made in the rates of return of white males for secular growth in earnings, mortality, ability, and taxes. The empirical investigation is based on 1959-60 schooling cost estimates and 1959 earnings data from the 1960 Census of Population. Private rates of return suggest that, in general, schooling is an attractive investment across all schooling levels and for all race-sex groups. Aggregated over all schooling groups, the unadjusted social rates of return were 15.1, 10.2, 6.4, and 10.3 percent for white males, males of other races, white females, and females of other races, respectively. Although adjustments for the nonschooling factors affected both private and social rates of return for elementary schooling and college only slightly, the effects for high school were substantial. Among the four U.S. Census Regions, high social rates of return were associated in general with low levels of social investment in schooling. The South, with the lowest level of schooling per student, incurred the highest social rate of return whereas the West, with the highest investment per student, received the lowest social rate of return. The adjusted social rate of return to all U.S. schooling investment (excluding graduate training) in 1959 was 11.8 percent.