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Returns to Skills Around the World: Evidence from PIAAC

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  • Eric A Hanushek
  • Guido Schwerdt
  • Simon Wiederhold
  • Ludger Woessmann

Abstract

Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares. Les estimations actuelles des rendements du marché du travail sur le capital humain donnent une image déformée du rôle des compétences dans les différentes économies. Les comparaisons internationales des analyses des revenus du travail dépendent presque exclusivement des mesures de réussite scolaire du capital humain, et les données intégrant des mesures directes des capacités cognitives se limitent essentiellement aux travailleurs en début de carrière aux États-Unis. Les analyses de la nouvelle évaluation des compétences des adultes sur le cycle de vie complet dans 22 pays (PIAAC) montrent que mettre l'accent sur les gains en début de carrière conduit à sous-estimer la durée de vie du rendement des compétences d'environ un quart. En moyenne, une augmentation d'un écart-type en capacités de calcul est associée à une augmentation de salaire de 18 pour cent chez les travailleurs les plus jeunes. Mais ceci masque une grande hétérogénéité entre les pays. Huit pays, dont les pays nordiques, ont des rendements entre 12 et 15 pour cent, tandis que six sont au-dessus de 21 pour cent, le plus grand rendement étant de 28 pour cent aux États-Unis. Les estimations sont remarquablement robustes aux différents résultats et mesures des compétences, aux contrôles supplémentaires, et aux divers sous-groupes. Curieusement, le rendement des compétences est systématiquement plus faible dans les pays à forte densité syndicale, où la protection de l'emploi est plus stricte et la part du secteur public plus grande.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Education Working Papers with number 101.

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Date of creation: 17 Dec 2013
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Handle: RePEc:oec:eduaab:101-en

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Keywords: education; cognitive skills; international comparisons; labour markets;

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Cited by:
  1. Michael Siegenthaler & Tobias Stucki, 2014. "Dividing the Pie: the Determinants of Labor’s Share of Income on the Firm Level," KOF Working papers 14-352, KOF Swiss Economic Institute, ETH Zurich.
  2. Stepan Jurajda & Daniel Munich, 2014. "Alphabetical Order Effects in School Admissions," CERGE-EI Working Papers wp509, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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