| Practice area: | Education and Labour Markets |
|---|---|
| Client: | Scottish Government Enterprise and Skills Strategic Board |
| Published: | 2 December, 2022 |
| Keywords: | 2022 economics of education further education higher education Labour Market Economics Public Policy |
Education, training, and skills acquisition – often referred to as human capital accumulation – are one of the most influential determinants of any country’s long term economic growth, and are associated with improved economic prosperity, living standards, and wellbeing. In general, the economic benefits of human capital acquisition are shared across all sectors of the economy: individuals in possession of additional education, training and skills are typically rewarded in the labour market by both higher earnings and an increased probability of being employed; while the government (often the primary funder of human capital acquisition) benefits economically through higher expected taxation receipts, higher levels of economic activity, and lower active labour market benefit expenditure. Furthermore, businesses see an economic benefit – over and above the higher salaries paid to employees – through increased innovation and positive effects on other employees (through better knowledge transfer and skills exchange), ultimately leading to improved productivity and profitability.
London Economics were commissioned by the Scottish Government’s Enterprise and Skills Strategic Board to analyse the Return on Investment associated with post-16 (i.e. post-compulsory) education and training in Scotland.
Specifically, using the Longitudinal Educational Outcomes (LEO) data for Scotland, we first estimated the labour market returns associated with the acquisition of higher education qualifications, further education/vocational qualifications, and Modern Apprenticeships. This is the first time that the Scottish LEO data has been used to analyse these labour market returns associated with education and training attainment. Using the results from the econometric analysis, we then assessed the benefits and costs to the individual (i.e. students/graduates), the Exchequer, and the employer (for Modern Apprenticeships only, as these qualifications are undertaken through the employer) to estimate the financial Return on Investment associated with each qualification.
Our findings are published in three separate summary reports, for our analysis for higher education qualifications (here), further education/vocational qualifications (here), and Modern Apprenticeships (here). In addition, a detailed Technical Report is available here.