Indicator A4. What are the earnings advantages from education?

Women do not earn as much as men in any OECD country. On average across the OECD, among adults with below upper secondary attainment, women with earnings from work (including full- and part-time workers) earn only 66% of men’s earnings. This gender gap of 34% in earnings is slightly higher than the gap for adults with a higher level of educational attainment: 31% among adults with upper secondary or post-secondary non-tertiary attainment, and 30% among those with tertiary attainment (OECD, 2021[1])

The gender gap in average earnings tends to be lower among full-time full-year workers, as women are more likely to work part time than men. Across OECD countries, 27% of women aged 25-64 and 15% of men in the same age group work part time or part year (OECD, 2021[1]). On average, among adults working full time, tertiary-educated women earn 76% of the earnings of their male peers. Women with below upper secondary attainment or upper secondary or post-secondary non-tertiary attainment earn 78% of the earnings of similarly educated men (Figure A4.1).

There is great variation in the earnings level of full-time working women compared to those of men. In nearly half of OECD countries, the lowest gender gap in earnings is observed among adults with below upper secondary attainment. This is the case for Chile, the Czech Republic and Hungary, it is more than 10 percentage points lower than the difference among tertiary-educated workers. In more than half of OECD countries, the gender gap is the widest among tertiary-educated adults. Australia, Canada, Costa Rica, Estonia, Israel, Latvia, Mexico and the United Kingdom are the only countries where the earnings of tertiary-educated women are closer to those of men when compared to women with lower attainment levels (Figure A4.1).

Reasons for the gender gap in earnings include gender stereotyping, social conventions and discrimination against women, but also differences between men and women in their choice of fields of study. Gender stereotypes and social conventions may also contribute to the observed differences in fields of study between men and women. Men are more likely than women to study in fields associated with higher earnings, such as engineering, manufacturing and construction, and information and communication technologies, while women’s educational choices are still directed at fields associated with lower earnings, including education, and arts and humanities. However, women’s earnings still do not surpass men’s earnings even in the same field of study (OECD, 2019[2]). Other reasons may relate to difficulties in combining a professional career with household and family responsibilities. To manage these different commitments, women are more likely to seek less competitive paths and greater flexibility at work, leading to lower earnings than men with the same educational attainment (OECD, 2016[3]).

In recent years, awareness of the differences in pay between men and women has risen. Many countries have introduced national policies to reduce disparities in earnings between men and women. Some countries have put in place concrete measures, such as pay transparency, to foster equity in pay between men and women (OECD, 2017[4]). In most OECD countries, the gender gap between the earnings of tertiary-educated men and women narrowed between 2013 and 2019. However, gender disparities in earnings seem to be an ongoing problem, as the average gap only closed by about 2 percentage points. Only Australia, Chile, Costa Rica, Estonia, Israel, Luxembourg and Mexico experienced a decrease of more than 5 percentage points. This gap even widened in Germany, Ireland, Italy, Spain, Turkey and the United Kingdom (Figure A4.2).

A strongly skewed earnings distribution signals income inequality, which may affect the social cohesion of communities and have a significant impact on economic growth. Data on the distribution of earnings among groups with different levels of education show the degree to which earnings centre around the country median. “Median earnings” refer to the earnings of all workers (including full-time and part-time workers), without adjusting for differences in hours worked.

The likelihood of earning less than the median decreases with educational attainment. On average across OECD countries, 68% of tertiary-educated adults earn more than the median of all workers; this likelihood falls to 44% for adults with upper secondary or post-secondary non-tertiary attainment, and to 27% for adults with below upper secondary attainment (OECD, 2021[1]). The difference is even more striking when considering the share of adults earning twice the median. Across OECD countries, an average of 24% of tertiary-educated workers belong to this category of earners, compared to only 7% of those with upper secondary or post-secondary non-tertiary attainment and 3% for those with below upper secondary attainment (Table A4.2).

In some countries, the earnings distribution is more skewed than in others. In Chile, Costa Rica, Colombia, Mexico and Portugal, over 80% of tertiary-educated workers earn more than the median (OECD, 2021[1]). Moreover, in Costa Rica, Mexico and Portugal, over 50% of tertiary-educated workers earn more than twice the median (Table A4.2). In these countries, the share of tertiary-educated adults is much lower than the OECD average (see Indicator A1).

At the other extreme of the earnings distribution, less-educated adults usually face large earnings disadvantages. On average across OECD countries, 10% of tertiary-educated workers earn at or below half the median, while 27% of those with below upper secondary attainment do so (Table A4.2).

The share of workers with below upper secondary attainment earning at or below half the median varies substantially across OECD countries, ranging from highs of 50% in Norway, 43% in Germany and 41% in the United States to lows of 10% in Belgium, 9% in Latvia and Portugal, and 0% in Poland and Slovenia (Figure A4.3).

On average across OECD countries, 25-64 year-olds with below upper secondary attainment working full time earn 22% less than those with upper secondary attainment, while full-time workers with tertiary attainment have an earnings advantage of about 57% (Table A4.1).

The relative earnings disadvantages for adults with below upper secondary attainment are generally smaller than the earnings advantages of tertiary-educated adults. The earnings disadvantage for adults lacking an upper secondary degree represents about 33% in the Czech Republic and the Slovak Republic, which is the highest across OECD countries, while it is less than 10% in Finland, Latvia and New Zealand (Table A4.1).

Having a tertiary degree carries a considerable earnings advantage in most OECD countries. The relative earnings for full-time workers are the highest in Chile, Colombia and Costa Rica, where adults with tertiary education earn more than twice as much as those with upper secondary education (Table A4.1). In all of these countries, the share of adults with tertiary attainment is among the lowest across OECD countries (about 25%), which may partially explain the large earnings advantage associated with a tertiary degree in these countries (see Indicator A1). In contrast, in Australia, Denmark, Estonia, Norway and Sweden, this earnings advantage is less than 30% for tertiary-educated adults working full-time, compared to those with upper secondary attainment (Table A4.1).

The earnings advantage also increases with level of tertiary attainment. In most OECD countries, full-time workers with a master’s or doctoral or equivalent degree earn more than those with a bachelor’s or equivalent degree, who in turn earn more than those with a short-cycle tertiary degree. On average across OECD countries, those with a short-cycle tertiary degree only earn about 23% more than those with upper secondary attainment. The earnings advantage reaches 45% for those with a bachelor’s or equivalent degree and 95% for those with a master’s or doctoral or equivalent degree. There are some exceptions to this general pattern. In Estonia and Portugal, full-time workers with a short-cycle tertiary degree earn even less than those with upper secondary attainment, while in Austria, Denmark, Finland, Greece, the Netherlands and Norway, the earnings of workers with a short-cycle tertiary degree exceed the earnings of those with a bachelor’s or equivalent degree (Table A4.1).

Higher educational attainment is also associated with faster increases in earnings throughout a person’s working life, meaning the wage differentials across educational attainment levels tend to increase with age. On average across OECD countries, younger adults (25-34 year-olds) with tertiary attainment working full time and part time earn 38% more than their peers with upper secondary attainment; 45-54 year-olds earn 70% more. The increase in earnings between these two age groups holds true for all OECD countries except the United Kingdom, although the size of the difference varies considerably across countries, ranging from less than 20 percentage points in Canada, Estonia, France, Spain and the United States to over 70 percentage points in Chile and Colombia (OECD, 2021[1]).

In most OECD countries, higher earnings advantage of older workers could be mostly related to seniority-based pay schemes (where wages rise with seniority) and to growing work experience and responsibilities (OECD, 2019[5]). However, it is also possible that the earnings advantage has fallen for younger generations, as they may face more competition in the labour market due to the rapid expansion of tertiary education (Bar-Haim, Chauvel and Hartung, 2019[6]). On average across OECD countries, the earnings advantage of tertiary-educated younger adults fell by 6 percentage points between 2013 and 2019. In nearly half of OECD countries, this difference decreased by less than 10 percentage points. Hungary and Turkey are the only two countries with a considerable drop in the earnings advantage of tertiary-educated younger adults (26 percentage points and 34 percentage points, respectively). The earnings advantage slightly increased over the same period in Belgium, Canada, Costa Rica, Denmark, Finland, France, Ireland, the Netherlands, the Slovak Republic, Spain, the United Kingdom and the United States. (Figure A4.4).

Foreign-born adults have more difficulty finding a job than their native-born peers, as they face various problems such as recognition of credentials obtained abroad, lack of skills, language difficulties or discrimination when looking for work. Foreign-born workers (full-time workers) are therefore more likely to accept any job they can get, which affects their level of earnings compared to their native-born peers (OECD, 2017[7]).

On average across OECD countries, foreign-born adults with below upper secondary attainment working full time earn 11% less than their native-born peers. The earnings gap in favour of native-born adults is above 30% in Luxembourg and the United Kingdom. In contrast, foreign-born adults with below upper secondary attainment earn slightly more than their native-born peers in Chile, Israel, Switzerland and Turkey (Figure A4.5).

In most OECD countries except Chile, Israel and Turkey, foreign-born adults with upper secondary or post-secondary non-tertiary education also face a disadvantage in earnings compared to their native-born peers. Moreover, the earnings gap between native- and foreign-born adults is similar to the one among those with below upper secondary attainment. The United Kingdom is the only country where the earnings gap narrows by more than 25 percentage points (from 36% to 10%) (Figure A4.5).

In Chile, France, Slovenia, Switzerland, Turkey and the United States, the earnings of foreign-born workers with tertiary attainment are the same as or even higher than the earnings of their native-born peers. In Chile, foreign-born tertiary-educated workers earn 47% more than their native-born peers (Figure A4.5).

Adults refer to 25-64 year-olds; younger adults refer to 25-34 year-olds.

Educational attainment refers to the highest level of education successfully completed by an individual.

Levels of education: See the Reader’s Guide at the beginning of this publication for a presentation of all ISCED 2011 levels.

The analysis of relative earnings of the population with specific educational attainment and of the distribution of earnings includes full-time and part-time workers. It does not control for hours worked, although the number of hours worked is likely to influence earnings in general and the distribution in particular. The analysis of differences in earnings between men and women include full-time workers only. For the definition of full-time earnings, countries were asked whether they had applied a self-designated full-time status or a threshold value for the typical number of hours worked per week.

Earnings data are based on an annual, monthly or weekly reference period, depending on the country. The length of the reference period for earnings also differs. Data on earnings are before income tax for most countries. Earnings of self-employed people are excluded for many countries and, in general, there is no simple and comparable method to separate earnings from employment and returns to capital invested in a business.

This indicator does not take into consideration the impact of effective income from free government services. Therefore, although incomes could be lower in some countries than in others, the state could be providing both free health care and free schooling, for example.

Data presented at the country level are average earnings, but there can be significant variations for individuals. Data shown in Table A4.2 “Level of earnings relative to median earnings, by educational attainment (2019)” illustrate the earnings variations among individuals. The median earnings refer to all adults with earnings from work, regardless of educational attainment.

The total average for earnings (men plus women) is not the simple average of the earnings figures for men and women. Instead, it is the average based on earnings of the total population. This overall average weights the average earnings separately for men and women by the share of men and women with different levels of educational attainment.

Please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[9]) for more information and Annex 3 for country-specific notes (https://www.oecd.org/education/education-at-a-glance/EAG2021_Annex3_ChapterA.pdf).

This indicator is based on the data collection on education and earnings by the OECD Labour Market and Social Outcomes of Learning Network (LSO Network). The data collection takes account of earnings for individuals working full time and full year, as well as part time or part year, during the reference period. This database contains data on dispersion of earnings from work and on student earnings versus non-student earnings. The source for most countries is national household surveys such as Labour Force Surveys, the European Union Statistics on Income and Living Conditions (EU-SILC), or other dedicated surveys collecting data on earnings. About one-quarter of countries use data from tax or other registers. Please see Annex 3 for country-specific notes on the national sources (https://www.oecd.org/education/education-at-a-glance/EAG2021_Annex3_ChapterA.pdf).

References

[6] Bar-Haim, E., L. Chauvel and A. Hartung (2019), “More necessary and less sufficient: an age-period-cohort approach to overeducation from a comparative perspective”, Higher Education, Vol. 78/3, pp. 479-499, http://dx.doi.org/10.1007/s10734-018-0353-z.

[1] OECD (2021), Education and earnings, http://stats.oecd.org/Index.aspx?datasetcode=EAG_EARNINGS (accessed on 17 June 2021).

[8] OECD (2021), OECD Wealth Database, https://stats.oecd.org/Index.aspx?DataSetCode=WEALTH (accessed on 17 June 2021).

[2] OECD (2019), Education at a Glance 2019: OECD Indicators, OECD Publishing, Paris, https://dx.doi.org/10.1787/f8d7880d-en.

[5] OECD (2019), Working Better With Age, OECD, http://dx.doi.org/10.1787/c4d4f66a-en.

[9] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.

[7] OECD (2017), International Migration Outlook 2017, OECD Publishing, Paris, https://dx.doi.org/10.1787/migr_outlook-2017-en.

[4] OECD (2017), The Pursuit of Gender Equality: An Uphill Battle, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264281318-en.

[3] OECD (2016), OECD Employment Outlook 2016, OECD Publishing, Paris, https://dx.doi.org/10.1787/empl_outlook-2016-en.

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