Impact of education on income

Why This Is Important

The success of an education system is manifested in, among other things, the success of individuals in finding sustainable employment as well as the level of wages that employers are willing to pay for the skills and knowledge that the individual brings to a job. There is a substantial body of evidence that shows that those with higher levels of education are more likely to participate in the labour market, face lower risks of unemployment, have greater access to further training and receive higher earnings on average.

These labour market advantages are an important outcome of education. They may even be the primary economic and social outcome, because earned income enables people to achieve a higher standard of living and many of the other individual and national outcomes associated with education may accrue either directly or indirectly from higher incomes.

Indicator

Denominator: (Data Source: OECD: Education at a Glance)
Mean annual earnings of upper secondary or post-secondary non-tertiary graduates, aged 25 to 64 years-old, by country.

Percentage difference in annual earnings
Numerator: (Data Source: OECD: Education at a Glance)
Mean annual earnings of women, aged 30 to 44 years-old, by country.

Denominator: (Data Source: OECD: Education at a Glance)
Mean annual earnings of men, aged 30 to 44 years-old, by country.

Real median weekly income
Numerator: (Data Source: Statistics New Zealand: New Zealand Income Survey)
Median weekly income by highest qualification, inflation adjusted to most recent year (base year).

Denominator: (Data Source: )
There is no denominator for this indicator.

Interpretation Issues

Movements in the relative income advantage can reflect changes in the relative labour market value of particular skills and levels of education, and changes in the skill requirements of the overall economy. As there are consistent differences in labour market conditions for the genders and different age cohorts, these should be given specific attention. Ideally, the labour market effects of education need to be considered not just at one point in time, but over the whole lifecycle, and alongside other factors which impact on employment.

The earnings data shown in this indicator vary between countries in a number of ways, implying that caution should be exercised in making cross-country comparisons. In particular, differences in the incidence of part-year work among individuals with different levels of educational attainment will have an effect on relative earnings that is reflected in the data for those countries reporting annual earnings but not for those countries reporting weekly earnings (for example, Australia and the United Kingdom). In addition, the relative earnings premia shown here will be greater than what would be evident from an examination of relative rates of pay because of international differences in the number of weeks worked per year and differences in hours worked per week by those with lower educational attainment.

As this indicator only counts those who earn income from employment (paid workers) it does not take into account differences in labour market participation rates or tell us the average earnings of those within each country at given levels of education. In New Zealand, labour market participation rates and average weekly incomes for those with degrees or higher and vocational or trade qualifications are substantially higher than those with only school qualifications or no qualifications.