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The Opportunity Cost of Education: Where Do the Lost Years Go?

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  • Hafizur Rahman
  • Jim Seldon
  • Zéna Seldon
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    Abstract

    Economists often introduce their classes to opportunity cost concepts by pointing out the additional incomes students could be earning were they employed full time rather than attending university. A potential additional cost, a reduction in years of future labor force participation, is unlikely to be mentioned. We argue that although this ‘work-life’ effect may safely be ignored in calculating rates of return to education, it must be taken into account if the goal is to correctly identify the cost of individuals’ time out of the labor force, particularly for purposes other than education. The fact that this issue was raised in a court case by a vocational analyst provides “real” life example of how this “work life” effect matters and may serve to intrigue our students and validate the study of our discipline. Our paper demonstrates the appropriate methodology and information necessary to identify work-life costs and suggests introducing the concept at introductory levels.

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    File URL: http://frank.mtsu.edu/~jee/2012/6_MS1108_pp43to52.pdf
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    Bibliographic Info

    Article provided by Middle Tennessee State University, Business and Economic Research Center in its journal Journal for Economic Educators.

    Volume (Year): 12 (2012)
    Issue (Month): 1 (Fall)
    Pages: 43-52

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    Handle: RePEc:mts:jrnlee:v:12:y:2012:i:1:p:43-52

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    Related research

    Keywords: opportunity cost; labor market; work-life effects of time out of labor force;

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    1. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    2. Andrew Leigh & Chris Ryan, 2005. "Estimating Returns to Education: Three Natural Experiment Techniques Compared," CEPR Discussion Papers 493, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    3. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
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