While there is some level of enjoyment in furthering one’s education, schooling is generally viewed as an investment. By opting to undertake additional schooling, one incurs direct expenses (such as tuition, book costs etc.), as well as opportunity costs in the form of foregone wages and/or leisure time. In order to lure an individual to further their education, he/she must be convinced that the benefits of higher education outweigh the costs.
This raises the question, what are the benefits of education? Classical economics tells us that educated workers should have at least two basic advantages over less educated workers:
- They tend to receive higher wages; and,
- They tend to have greater employment stability.
Such benefits are indeed appealing, but are they realised in Barbados?
Wages and Education
Most views on wage determination are rooted in human capital theory. In its most basic form, human capital is the stock of knowledge or characteristics that a worker has that determines their productivity. In theory, workers with more human capital tend to be more productive, and by extension, receive higher wages. Human capital can be attained via a number of channels. Some persons are born with it, while some attain it through training, some through pre-labour market influences and others through schooling. Therefore, if schooling increases human capital, then those with higher levels of schooling should (in theory) receive higher wages. For Barbados, this theory appears to hold. Figure 1 plots the average wages of workers in Barbados by education over the period 2004 to 2012. As shown in the chart, wages vary substantially by educational attainment: on average, individuals with a degree or professional qualification earn about 138% more than persons with no qualifications, 85% more than those who hold only secondary school qualifications (that is, CXCs, O-levels or a Barbados Secondary School Leaving Certificate [BSSC]), and 52% more than individuals with solely post-secondary education qualifications (for instance, A-Levels/CAPE qualifications, Certificates and Diplomas).
Figure 1: Average weekly earnings of workers by academic qualification (2004-2012)
Note: Data attained from the Barbados Statistical Service. Estimates based on predictive margins from an interval regression.
The earnings premium also held across the various industries in Barbados (Figure 2). Between 2004 and 2012, the largest education-earnings gap was observed in the “Activities of Households as Employers” industry. In this industry, the typical worker with a degree or professional qualifications earned 130% more than the typical worker without. Meanwhile, the smallest premium was recorded for those working in Public Administration and Defence, where the premium was 53%.
Figure 2: Average earnings advantage of workers with degrees/professional qualifications across various industries (2004-2012)
Notes: * Other Groups include the following: Information & Communication, Activities of Extraterritorial Organisations & Bodies, Real Estate & Arts, Entertainment & Recreation and Not Stated. Data attained from the Barbados Statistical Service. Estimates based on predictive margins from an interval regression.
Education and employment stability
At this juncture, we turn our attention to the job stability of the highly educated. To complete this task, I opt to focus on the Barbados unemployment rate by education during the recent global financial crisis.
Since 2008, the Barbadian economy has been struggling with negative/anaemic economic growth. Economic losses quickly translated into social losses, as the average rate of unemployment reached double digits for the first time since 2004, and at the end of 2012, stood at 11.6%, 4.2 percentage points above the rate recorded in 2007. However, the rate of job losses was not uniform across the labour force. As shown in Figure 3, although the unemployment rate increased among all people at all educational levels, people with college/university qualifications seemed to have been better shielded from the negative spill-over effects of the crisis. In fact, the cumulative increase in the unemployment rate for those with degrees and professional qualifications was less than half of that for individuals without these qualifications (Figure 4).
Figure 3: Unemployment Rates by Academic Qualification (2007 – 2012)
Note: Data attained from the Barbados Statistical Service. Estimates based on author’s calculations
Figure 4: Cumulative Change in Unemployment Rates by Academic Qualification (2007-2012)
Note: Data attained from the Barbados Statistical Service. Estimates based on author’s calculations
Concluding remarks
Summing up, the labour market data suggests that on average, persons with higher levels of education have a large competitive advantage in Barbados. Specifically, they are likely to receive higher wages and enjoy greater job stability. However, one can’t help but wonder: will the educational benefits of higher education continue in the future
