1  Introduction

Apart from increasing their pay, does more education make a difference to people’s lives? This paper reviews evidence which attempts to answer this question.

Economists typically think of education as an investment of current resources in exchange for future benefits. A great deal of research, for example, has looked at how much more people earn, on average, after completing an additional year’s education. Empirical studies typically find that, on average, an additional year of education increases an individual’s future wages by somewhere between 5% and 15%, depending on the time and country (Temple 2001).

Higher pay, however, is only one of the potential benefits of more education. People also continue their studies to further their personal development and to gain skills that benefit other parts of their lives. As Weiss (1995, p.151) puts it:

Education does not have to be justified solely on the basis of its effect on labour productivity. This was certainly not the argument given by Plato or de Tocqueville and need not be ours. Students are not taught civics, or art, or music solely in order to improve their labour productivity, but rather to enrich their lives and make them better citizens.

This review paper looks at what published evidence is available for these ‘wider’ (that is, wider than just earnings-related) benefits of education, in a number of different areas of life. The wider benefits of education are defined here as those benefits which are not related to greater earnings, and might include such things as better health, less crime, improved civic participation and greater life satisfaction. Double-counting must be avoided, though. If, for example, the only reason more education leads to better health is by virtue of more-educated people being paid more, and higher-paid people having better health, then this is an example of an earnings-related benefit of education, not a wider benefit.

Surprisingly little has been written which draws together evidence on the wider benefits of education. Haveman and Wolfe (1984) is probably the most cited of a handful of review papers on the wider benefits of education. The evidence presented in these review papers is not wholly satisfactory, however, for a number of reasons. Many of the studies which are cited use data from developing countries and are not easily generalised to New Zealand. Many have only minimal controls for potentially confounding factors (as is discussed further below). The most comprehensive overview of the wider benefits of education is provided by Behrman and Stacey (1997) but this book concerns itself almost exclusively with the economics literature on this topic, ignoring much that has been written in other fields, for example in mainstream health journals.

Why is it important to look at the wider benefits of education? A consideration of how large the total benefits of education are, and to whom these benefits accrue, is essential in providing advice on the nature and extent of government involvement in education (Barr 1998, ch.13). Empirical studies of the benefits of education, however, tend to focus solely on earnings-related benefits. If wider benefits exist then these empirical estimates might considerably understate the total benefits of education. Haveman and Wolfe (1984), for example, suggest that the wider benefits of an additional year of education could be of the same magnitude as the earnings-related benefits. It is desirable, therefore, to have at least some knowledge of the wider benefits of education, in order to better inform government policy on education, and in particular to inform decisions on whether putting resources into increasing or improving education is a good investment to make. This paper attempts to provide some of this knowledge.

We already know something of the wider benefits of education. Studies consistently find that more-educated New Zealanders tend to do better on a whole range of outcomes. Fergusson, Poulton, Horwood, Milne and Swain-Campbell (2003b), for example, present unadjusted associations between different measures of educational attainment and a range of early-adult outcomes, using data from both the Christchurch Health and Development Study (HDS) and the Dunedin Multidisciplinary Health and Development Study (MHDS).[1] In these studies, better-educated people were less likely to have some types of mental health disorders; less likely to commit crimes and to have a criminal conviction; less likely to be unemployed; less likely to engage in risky sexual behaviours and to have an early pregnancy; and less likely to show early signs of some health problems. Wilson (2000) also shows, across a range of measures, that better-educated New Zealanders are more likely to be in good health.

For policy purposes, however, what is primarily of interest is the benefits (and costs) of more education across the whole of society, rather than just the benefits (and costs) to the particular individuals who engage in this extra education. Policy makers are also more interested in whether additional education causes better outcomes or whether it simply coincides with better outcomes. The studies of Fergusson et al and Wilson which are cited above are not able to answer these questions and are not designed to do so.

Section 2 of this paper looks further at the issue of individual and social benefits, and at the issue of causation and coincidence. This latter issue, in particular, is fundamental to the analysis presented in this paper. Section 2 also describes how this review was conducted, and which purported benefits have, and have not, been investigated.

Section 3 looks at evidence on causal links between greater education and a number of benefits: substance use; crime; welfare dependence; unemployment; mental health; teenage pregnancy; physical health; social connectedness; political participation; children’s education; and subjective well-being. Section 4 discusses the conclusions, including policy implications, that can be drawn from this evidence.