Media Briefings

The Impact Of Education On Earnings: Evidence From The Post-War Raising

  • Published Date: December 2010

The 1947 increase in the UK’s minimum school leaving age from 14 to 15 raised men’s wages but had no noticeable effect on women’s wages. That is the central finding of research by Professors Paul Devereux and Robert Hart, published in the December 2010 issue of the Economic Journal.

Their study indicates that while the returns to an additional year of schooling can be very high, they may differ across the education distribution. It also seems to be important for the additional year of schooling to lead to additional qualifications. This was the case with the 1973 raising of the school leaving age from 15 to 16 but not with the 1947 increase.

These findings will be significant as a number of big changes to post-16 education in the UK come into force over the next few years – the raising of the school leaving age from 16 to 17 by 2013 and to 18 by 2015; and the abolition of the education maintenance allowance, which paid money to pupils from low-income families who remained in education beyond 16.

The 1944 Education Act announced that the UK’s minimum school leaving age would be raised from 14 to 15 within three years. The actual increase came into effect on 1 April 1947.

The reform was accompanied by investment in more teachers, buildings and furniture to accommodate the rapidly increased student numbers and the pupil/teacher ratio remained quite stable. But while the higher minimum age provided an extra year of schooling, very few young people who were affected stayed in school until 16 to take national exams and acquire a credential.

The effect of the reform was that individuals born before April 1933 faced a minimum school leaving age of 14 and individuals born from April 1933 onwards faced a minimum age of 15. This had a very large impact on school leaving behaviour: the fraction of young people leaving school before age 15 fell from over 60% for the 1932 cohort to about 10% for the 1934 cohort.

The researchers analyse two datasets – the General Household Survey and the New Earnings Survey Panel Dataset – and find that the change in the minimum school leaving age increased men’s wages but had no noticeable effect on women’s wages.

Calculating the implied return to an extra year of schooling requires taking account of both the increase in schooling caused by the reform and the accompanying increase in wages. This shows that the return to an additional year of schooling is about 5% for men and zero for women.

These findings are generally consistent with recent evidence on the effect of compulsory schooling laws in Europe. For example, researchers have found that similar changes in France and Germany have had zero or low effects on wages. But it is still perhaps surprising that women gained no benefit (at least in terms of wages) from the extra schooling received.

A key element in determining the returns to compulsory schooling is the extent to which more restrictive laws result in increased qualifications. Because the 1947 reform only induced participation until age 15, it would not have been expected to increase the proportion of people who held qualifications such as O-levels. The research finds no evidence of any effect of the reform on the probability of holding an academic credential.

Using compulsory schooling law changes, researchers have generally found higher returns to schooling in the United States. One possible reason is heterogeneous returns to schooling. Very few people actually had to change their behaviour as a result of US changes in compulsory schooling.

The UK’s 1947 change in the compulsory schooling law makes it possible to estimate the returns to extra schooling for men and women in a situation where about half the population leave school at the earliest possible age. Hence, the differing results between the United States and the UK could arise if the returns to schooling differ across the education distribution.

The researchers conclude:

‘Our estimates may help to explain why half the UK population dropped out of school as early as they could. One simple explanation is that the returns to additional schooling were actually quite low for this group and it was rational to leave school early.

‘While it is difficult to quantify the costs of an extra year of schooling, this story is certainly consistent with the results for women.’

ENDS

Notes for editors: ‘Forced to be Rich? Returns to Compulsory Schooling in Britain’ by Paul Devereux and Robert Hart is published in the December 2010 issue of the Economic Journal.

Paul Devereux is professor of economics at University College Dublin. Robert Hart is professor of economics at Stirling University.

For further information: contact Paul Devereux on +353-1-716-8279 (email: devereux@ucd.ie); or Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com).