As the World Economy Slumps, Ed Investment Brings a Payoff, OECD Says

As nations around the globe, including the United States, attempt to crawl out of a deep recession, the evidence suggests they would be wise to invest in education because of the strong economic payoff it brings across their societies and to individual workers, a new report says.

The Organization for Economic Cooperation and Development, or OECD, makes that case in a new report, “Education at a Glance,” which offers comparisons across countries in various educational and economic indicators.

Part of the reason that encouraging students to stick with K-12 education and pursue higher education, the authors say, is that despite some glimmers of an economic rebirth, unemployment is likely to remain high for some time. If recent high school graduates or college students can further their training, rather than seeking out a job that may not be there, that’s a sound investment, according to the report. And OECD’s data show a strong payoff from education: A male worker who obtains a college education, on average, earns $186,000 more in gross earnings benefits over a lifetime than a worker who does not, in the nations studied.

How does the United States compare? For American males who obtain a college education, the difference in the lifetime payoff is $367,000, according to the OECD, the highest gross earnings payoff among the industrialized nations studied. It’s $229,000 for females.

The OECD, which is based in Paris, notes that while governments invest significant public funding in college education, private investment exceeds public spending in this area in most of the nations studied. Students in the United States are asked to pay a greater amount, about $90,000, in direct and indirect costs, such as lost earnings, than students in any other country evaluated. Tuition fees in the United States are also the highest of any country, the report says. In the United States, tuition costs, as opposed to lost earnings, make up a significant chunk of that private investment.

The report is not meant to provide a “policy prescription,” Andreas Schleicher, the head of indicators and analysis for OECD’s education division, explained in an e-mail.

“What it shows is that the net present value of the total public economic benefit of higher education is significantly larger than the total public economic costs,” he said. “We infer from this that public investment in higher education bears high returns, particularly in countries where high private costs may be the bottleneck for expanding higher education participation.”

That does not mean the OECD is telling these countries that they should spend more on higher education, he added.

On the whole, there has been a strong growth worldwide in the share of people seeking something beyond simply compulsory education, the OECD reports. The growth has been especially “dynamic” in the area of early-childhood education. In 1996, 41 percent of children 4 or younger were enrolled in educational institutions, the report says. In 2001, the proportion had risen to 71 percent. The authors note in that in Sweden, the share went from 40 percent to 98 percent, “virtually universal.” The United States ranks relatively low in its rate of growth in this area, though that is partly the result of the large gains made by other nations that had very little early-childhood education, Schleicher explained in an interview. Early-childhood enrollment rose from 34 percent in the United States in 1996 to 50 percent today, in the age group studied, the OECD says (table C.1.1).

The report also notes the discrepancies in how nations spend money on education. The United States, for instance, spends relatively little on teachers’ salaries, despite its high overall spending on schools. The United States instead spends a lot on capital investments in education and compensation for nonteaching staff, relatively speaking, the OECD says. While below-average teacher salaries and above-average teacher working time push spending down, longer student-learning hours and below-average class sizes bring it up, the report finds.