2.4 How important is each component?
Figure 2 shows the relative size of the various components of male tertiary returns across the OECD.
- Figure 2 - Components of return to a man's tertiary education
- Source: OECD
The key point regarding New Zealand's relative returns are as follows:
- They are dominated by the gross earnings benefit, the foregone earnings, and the income tax effects.
- The foregone earnings for New Zealand are the closest in magnitude to the OECD average. The use of the full-time minimum wage to proxy the opportunity cost of time results in higher foregone earnings for women when part-time work is prevalent.
- Our income tax cost is 70% of the OECD average, while our gross earnings benefit is only 57% of the average. That reflects New Zealand’s highly progressive tax system: despite earning a 43% smaller gross premium than their counterparts across the OECD, New Zealand’s tertiary graduates pay only 30% less in additional taxation.
- The OECD considers that New Zealand men have a small, negative employment effect from tertiary education. That suggests there is a greater cost of a tertiary qualified man being employed than a man with only upper-secondary education. This partly reflects New Zealand’s near full employment for both secondary school and tertiary graduates at the time of the analysis by the OECD. Other domestic research indicates that this is due to greater lost wages, rather than a greater probability of unemployment (For example, David Earle, 2010a, p.3)[14]
Notes
- [14]David Autor (2010) finds that in the US employment and wage growth have been highest in high-skilled jobs at the expense of “middle-skilled” jobs and especially jobs dominated by moderately educated men. Autor also points to similar dynamics in the EU.
