Is it worth going to university? Part II
The debate around the costs and benefits of attending university is, at present, very narrowly focused on expected earnings over the working lifetime (see my previous blog-post for example). However this debate needs to be broadened out. The returns to education in general and university in particular may be far wider than the private financial returns that are the focus of so much of the economics literature.
For a start, to compare earnings we are conditioning on the individual being in a job – and while graduates earn more when employed, they are also more likely to be in a job, which has never been more important given current labour market conditions. Recent figures from National Statistics show that in the third quarter of 2010, unemployment amongst 21-24 year olds with a degree was lower (11.6%) than for the same age group without a degree (14.6%) and far lower than the unemployment rate of 18-20 year olds (27.0%).
The range of job opportunities available to graduates is also larger (not many job adverts specify that not having a degree is a requirement), moreover as a graduate you are more likely to be in a job that you actually enjoy doing, and that offers opportunities for self-accomplishment and social interaction – which are all important for mental health, happiness and general “well being” outcomes. Oreopoulos and Salvanes (2011) show for US data that amongst individuals with similar family backgrounds, those with more education are more likely to report being happy with life and be in a job that they enjoy and that gives them a sense of achievement. This is the case even after taking into account the fact that more education increases income which itself may increase happiness and related outcomes. The largest increases in each measure are associated with the difference between those who do and do not attend university.
Though this US evidence is only suggestive – it could be that people who go to university have unobserved characteristics that mean that they would always be happier regardless of whether or not they went to university – the fact that the relationships exists even taking into account a wide range of background characteristics and income makes a strong case that higher education positively impacts these health and well-being outcomes. Moreover, other evidence from the US (Stowasser, Heiss, McFadden and Winter, 2011) and the UK (Oreopoulos, 2007) shows that increasing education has a positive causal impact on physical and mental health.
Aside from these effects on the likelihood of being in a job and enjoying that job there are other considerable non-pecuniary benefits of going to university. A university education can impact major life outcomes such as location, marriage/relationships and child-bearing. It can also enhance key personal skills, characteristics and preferences – for example critical thinking, decisiveness, communication, confidence, self esteem, self awareness, risk attitude and future orientation – that are not easily captured by qualifications.
Attending university broadens your experience and may make you better at running your own life and managing your time and resources – making you more attractive in the marriage market and benefitting others, such as your children. This broadening of experience and skills and encountering of new people, new environments, new perspectives and opportunities – the “consumption value” of university if you like – cannot easily be monetarised but is all a part of the “return”.
The likelihood is that if you go to university you will earn more over your lifetime than if you elect not to go, and even paying £9,000 per year in tuition fees you will still see a good return on your investment (see previous blog post). However, I would argue that much more important than this narrow earnings focus is the fact that you will also be less likely to be unemployed, more likely to be in a job that you enjoy, have better physical and mental health and gain in many personal skills and characteristics that will improve your outcomes both inside and outside the labour market over the rest of your life.
National Statistics: http://www.statistics.gov.uk/cci/nugget.asp?id=1162
Oreopoulos, P. (2007). ‘Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling’, Journal of Public Economics,Vol. 91, pp. 2213-2229.
Oreopoulos, P. and Salvanes, K. (2011). ‘Priceless: The Nonpecuniary Benefits of Schooling’, Journal of Economic Perspectives, Vol. 25, pp. 159-184.
Stowasser, T., Heiss, F., McFadden, D. and Winter, J. (2011). ‘“Healthy, Wealthy and Wise?” Revisited: An Analysis of the Causal Pathways from Socio-economic Status to Health’, NBER Working Paper, No. 17273.