copy the linklink copied!Indicator A4. What are the earnings advantages from education?

Relative earnings, by educational attainment

Earnings tend to increase with the level of educational attainment. On average across OECD countries, adults (aged 25-64) without upper secondary education earn about 21% less for part-time or full-time employment than those with upper secondary education, while those with a tertiary degree earn about 57% more (Table A4.1).

Indeed, having a tertiary degree carries a considerable earnings advantage in most OECD and partner countries. The relative earnings for full-time and part-time workers are highest in Chile, Colombia and Costa Rica, where adults with a tertiary education earn over twice as much as those with upper secondary education. In all of these countries, the share of adults with tertiary education is among the lowest in OECD and partner countries (less than 25%), which may partially explain the large earnings advantage of tertiary-educated workers (OECD, 2017[1]).

The earnings advantage of tertiary-educated workers, however, varies considerably by level of tertiary attainment. In most OECD member and partner countries, workers with a master’s or doctoral degree earn more than those with a bachelor’s degree, who in turn earn more than those with a short-cycle tertiary degree. On average across OECD countries, those with a short-cycle degree earn about 20% more than those with only an upper secondary education. The earnings advantage increases to 44% for those with a bachelor’s degree and to nearly 91% for those with a master’s or doctoral degree (Figure A4.1).

There are some important exceptions to this general pattern. In Estonia and Portugal, adults with a short-cycle degree earn less than those with an upper secondary education. In Austria, the same is true for those with a bachelor’s degree. In all three cases, however, these groups represent relatively small shares of the tertiary-educated population. Moreover, unlike in most countries, the earnings of workers with a short-cycle tertiary degree are higher than those of workers with a bachelor’s degree in Austria, Denmark, Finland and Norway. With the exception of Denmark, these countries have among the highest short-cycle tertiary attainment rates, with at least 10% of adults having attained this level (see Indicator A1).

Relative earnings of tertiary-educated workers, by age and through time

Higher educational attainment is associated with higher earnings throughout a person’s working life, and the advantage is particularly large for older workers. On average across OECD countries, young adults (25-34 year-olds) with tertiary education earn nearly 40% more than their peers with upper secondary education. Older adults (45-54 year-olds) earn 70% more. The earnings advantage increases with age in all OECD and partner countries, although the size of the difference varies considerably, from over 70 percentage points in Chile, Colombia and Ireland to less than 10 percentage points in Estonia, New Zealand and the United States (Figure A4.2).

A greater earnings advantage for older age groups could mean either that the earnings advantage increases with experience or that the earnings advantage has fallen for younger generations (or a combination of both effects). In the first case, age acts as a proxy for work experience and in the second case, age acts as a proxy for changes over time. Although it is not possible to determine the main driving force in each country for the results shown in Figure A4.2, it is possible to shed some light on the issue by analysing the trends in earnings advantages over the past decade.

In most OECD countries, the earnings advantage of tertiary-educated workers has not changed considerably between 2007 and 2017. In at least 20 OECD and partner countries, the difference in the earnings advantage of adults with tertiary education has changed by less than 10 percentage points during the last decade, and in many cases the difference is less than 5 percentage points. Although these results only cover one decade, they suggest that in many OECD countries, the higher earnings advantage of older workers is mostly the result of a positive relationship between relative earnings and work experience.

A possible explanation for the increase in the earnings advantage of tertiary workers as they progress in their careers is that people with higher levels of education are more likely to be and remain employed, and may have more opportunities to gain experience on the job.

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Figure A4.2. Relative earnings of tertiary-educated adults, by age group (2017)

25-34 year-old and 45-54 year-old workers (full- and part-time workers); upper secondary education = 100

1. Year of reference differs from 2017. Refer to the source table for details.

2. Earnings net of income tax.

3. Index 100 refers to the combined ISCED levels 3 and 4 of the educational attainment levels in the ISCED 2011 classification.

Countries are ranked in descending order of the relative earnings of 45-54 year-olds with tertiary education.

Source: OECD (2019), Education at a Glance Database, http://stats.oecd.org/. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933977011

Distribution of earnings relative to the median

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, without adjusting for differences in hours worked.

Across OECD and partner countries, the likelihood of earning more than the median increases with educational attainment. On average across OECD countries, 68% of tertiary-educated adults earn more than the median of all employed adults, including both full-time and part-time earners, while only 26% of adults without upper secondary education do so. The difference is even more striking when considering the share of adults earning more than twice the median. Across OECD countries, an average of 23% of tertiary-educated workers earn more than twice median earnings, compared to only 7% of those with upper secondary or post-secondary non-tertiary education and 3% for those without upper secondary education (Table A4.2).

In some countries, the earnings distribution is more skewed than in others. In Chile, Costa Rica, Colombia, Hungary, Mexico and Portugal, over 80% of tertiary-educated workers earn more than the median. Moreover, in Costa Rica and Mexico about half of tertiary-educated workers earn more than twice median earnings. Indeed, countries with relatively high levels of income inequality also tend to be those with the highest share of the population without tertiary or even upper secondary education (OECD, 2018[2]).

Among tertiary-educated workers, the distribution of earnings can vary considerably depending on the level of tertiary education attained. In nearly all OECD countries, the share of adults earning more than twice the median increases at each level from short-cycle tertiary, to bachelor’s and master’s or doctoral degrees. On average across OECD countries, 11% of workers with a short-cycle tertiary degree earn more than twice the median. The share increases to 19% among those with a bachelor’s degree and to 32% among those with a master’s or doctoral degree (Figure A4.3).

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Figure A4.3. Percentage of tertiary-educated adults earning more than twice the median, by level of tertiary education (2017)

25-64 year-old workers (full- and part-time workers)

1. Year of reference differs from 2017. Refer to the source table for details.

2. Earnings net of income tax.

3. Bachelor's or equivalent includes master's, doctoral or equivalent.

4. Data refer to full-time, full-year earners only.

5. Bachelor’s, master’s, doctoral or equivalent include short-cycle tertiary.

Countries are ranked in descending order of the share of 25-64 year-olds with a bachelor's or equivalent qualification earning more than twice the median.

Source: OECD (2019), Education at a Glance Database, http://stats.oecd.org/. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933977030

Relative earnings of tertiary-educated adults, by field of study

The earnings advantage for tertiary-educated adults also varies by their field of study. Among the 14 OECD countries with data available, the broad fields of study most commonly associated with the highest earnings are engineering, manufacturing and construction (six countries) and ICT (four countries). On average across OECD countries, only 14% of tertiary graduates in 2017 obtained a degree in engineering, manufacturing and construction and 4% obtained a degree in ICT. Using higher earnings as a proxy for market demand, these figures suggest a potential imbalance in some countries between the fields most in demand by the labour market and the current supply of graduates. Indeed, this imbalance may help explain the high earnings premium for these fields in some countries (see Box A1.1 in Indicator A1).

In some countries, the difference in earnings advantages across fields is relatively small. This is the case in Australia and Finland, where those with the highest-paying degree earn 30-40% more than those with the lowest-paying degree. In other countries, such as the United Kingdom and the United States, those with a degree in the highest-paying field of study earn nearly twice what those with a degree in the lowest-paying field of study earn (Table A4.4). Some of the differences in earnings across fields may be explained by different patterns of full-time versus part-time employment.

In some countries, there are tertiary fields of study that are actually associated with an earnings disadvantage when compared to adults with only upper secondary education. In the United Kingdom, for example, individuals with a tertiary degree in the broad fields of education or arts and humanities, social sciences, journalism and information earn less on average than adults who attained an upper secondary qualification. In the same country, adults with a tertiary degree in engineering manufacturing and construction and natural sciences, mathematics and statistics earn over 60% more than adults with upper secondary education (Figure A4.4).

Data from the few countries able to disaggregate earnings across narrower fields of study highlight the wide discrepancies that may exist within a broad field. For example, within the broad field of health, those with a medical or dental degree earn about twice as much as those with a degree in nursing or associated health field in nearly every country with available data (Table A4.4).

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Figure A4.4. Relative earnings of tertiary-educated adults, by field of study (2017)

25-64 year-old tertiary-educated workers (full- and part-time workers); upper secondary education (all fields) = 100

1. Data refer to the field of study at the bachelor's level.

2. Earnings net of income tax.

3. Earnings refer to academic programmes only.

4. Arts and humanities, social sciences, journalism and information does not include the subfield of Languages.

5. Year of reference differs from 2017. Refer to the source table for details.

Countries are ranked in descending order of the relative earnings of 25-64 year-olds with a tertiary degree in information and communication technologies.

Source: OECD (2019), Table A4.4. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933977049

Differences in earnings between women and men, by educational attainment

Women do not earn as much as men in any OECD or partner country. Across OECD countries, tertiary-educated women working full time earn only 75% of the earnings of tertiary-educated men. This 25% gap in the earnings of tertiary-educated women is slightly larger than the gap for women with below upper secondary education and for those with upper secondary or post-secondary non-tertiary education (both 22%) (Table A4.3).

As women are more likely to work part time than men, the gender gap in the average earnings of all workers (including full-time and part-time earners) is even larger. On average across OECD countries, tertiary-educated women in full-time or part-time work earn only 69% of the earnings of tertiary-educated men (OECD, 2019[3]).

The reasons for the gender gap in earnings include gender stereotyping, social conventions and discrimination against women (OECD, 2017[4]), but also differences between men and women in their choice of fields of study. Men are more likely than women to study in fields associated with higher earnings, such as engineering, manufacturing and construction or ICT, while a larger share of women enrol in fields associated with lower earnings, including education, and arts and humanities (see Indicator B4).

Nevertheless, Figure A4.5 highlights the fact that women earn less than men even with a degree in the same field of study. Indeed, women’s earnings do not surpass men’s in any field of study with available data – although some fields seem to have been more successful than others in reducing the gender pay gap. In most countries with available data, the gender gap is smaller for the fields of education and ICT and larger for the field of business, administration and the law when compared to the average gap across all fields of study. Additional factors which help explain the gender gap in earnings within the same field of study could include employment in different sectors within the field, career progression, types of occupation and types of contracts.

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Figure A4.5. Women's earnings as a percentage of men's earnings, by field of study (2017)

25-64 year-old full-time tertiary-educated workers

1. Year of reference differs from 2017. Refer to the source table for details.

2. Earnings net of income tax.

3. Earnings by field refer to academic programmes only.

4. Earnings by field refer to the field of study at the bachelor’s level.

Countries are ranked in descending order of women's earnings (all tertiary) as a percentage of men's earnings.

Source: OECD (2019), Education at a Glance Database, http://stats.oecd.org/. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933977068

In recent years, awareness of the differences in pay between men and women has risen. Many countries have introduced new 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 of the countries with available data, the gender gap between the earnings of tertiary-educated men and women has narrowed between 2010 and 2017. On average across OECD countries with data available for both years, the gap fell by about 1.5 percentage points, reaching just over 5 percentage points in Austria, Estonia and Korea (OECD, 2019[3]).