Returns-to-Ed

STUDENT NUMBERS DROP WHEN UNSKILLED WAGES RISE: EVIDENCE FROM SPAIN’S CONSTRUCTION BOOM

A 10% fall in the wage ratio of educated to uneducated workers leads to a 1% increase in school dropouts. That is the main finding of research by Ainhoa Aparicio-Fenoll, which explores the effect of the pre-crisis construction boom on education in Spain.

The research, presented at the Royal Economic Society’s 2013 annual conference, shows how, after seeing the sharp increases in wages and employment opportunities in construction during the economic boom, many students decided to give up studying. What’s more, individuals that remained in school obtained worse results, probably because they were less motivated.

These decisions had far-reaching consequences once the boom ended, as the dropouts now find themselves without jobs and education. The author comments:

‘Uneducated individuals are more vulnerable to the current economic crisis.

‘Young people are now paying the consequences of the schooling decisions they took during the economic boom.’

The study takes advantage of the fact that most jobs in construction go to unskilled men. This means that while unskilled men had the opportunity to earn more during Spain’s construction boom, women did not.

Comparing the educational choices of men and women, the study finds that a 10 percentage point fall in returns to education, as measured by the ratio of wages for educated workers compared with uneducated workers, reduces the probability of students being enrolled in post-compulsory education and obtaining pass grades by 1% for 16- to 18-year-olds. It also lowers the grades of the remaining students as they become demotivated by the success of their peers who opted out of education.

The research shows this by comparing schooling decisions of men and women in Spain during the economic boom. This comparison is illustrative because men experienced much higher increases in wages and employment because of the leading role of the construction sector.

The construction boom represented a huge increase in construction activity in many countries, with Spain’s property bubble among the largest. During Spain’s boom, 23% of all working men with less than a high-school education worked in construction. By contrast, only 5% of men with high-school education or more were employed in the construction sector and women overall represented only 5% of total construction workers. From 1997 until the financial crisis, wages in construction rose by well over 50%.

ENDS


Contact:

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh

Page Options