New study shows subsidizing college yields significant employment and tax gains

The Organization for Economic Cooperation and Development (OECD) released Tuesday its annual report on education trends in the world’s wealthiest countries. The report shows a growing number of OECD countries, made of up 34 wealthy nations, the U.S. included, have advanced the number of individuals acquiring a college education compared to previous generations, as the below graph indicates.

Screenshot of web powerpoint presentation by OECD

In a prepared statement, OECD Secretary-General Angel Gurría said, “The cost to individuals and society of young people leaving school without a qualification keeps rising.”

Gurria added: “We must avoid the risk of a lost generation by all means. Despite strained public budgets, governments must keep up their investment to maintain quality in education, especially for those most at risk.”

College graduation rates have risen by 19 percentage points in the past 14 years for what the OECD calls tertiary-type A , or bachelor’s and some master’s degrees.

The relationship between college completion and employment among OECD countries, typically the wealthiest nations on the planet, was also explored in the 400-plus page document.

From a press release:

Unemployment rates among university graduates stood at 4.4% on average across OECD countries in 2009. But people who did not complete high school faced unemployment rates of 11.5%, up from 8.7% the year before. This adds to the huge problem of youth unemployment that today exceeds 17% in the OECD area.

More detailed findings were presented via teleconference to journalists by professor Andreas Schleicher, directorate of education for the international group.

Most striking to American audiences is the rate at which the number of U.S. college degree holders declined as a total share of higher learning degree holders among the G20 states and the economic benefits of an increasingly college-educated society despite this country’s high tuition costs.

While the U.S. makes up 26 percent of the 255-million college educated individuals living in these privileged countries, that disproportionate representation begins to thin when comparing younger and older generations. Among 55-64 year-olds, the U.S. makes up 35.8 percent of the 39 million people across participating OECD countries, yet of the 81 million OECD degree holders aged 25-34, America’s share drops to 20.5 percent. Emerging economic powers like Mexico and Brazil saw their share of college graduates rise from 1.8 and 3.5 percent to 3.9 and 4.5 percent, respectively, between the two age groups.

Schleicher explained that while America’s rate of college-educated individuals is still increasing, other countries are matriculating its students faster.

A more-educated world community is not forcing wages to compress, the study also notes.

Individuals in OECD countries possessing a college-equivalent degree can expect to earn over 50 percent more than a person with a high school degree. In the U.S., that yawn is one of the most dramatic, with the wage differential nearly 80 percent.

The gap between high-school and non-high-school graduates is also significant: In not earning a certificate, a U.S. worker can expect his or her wages to be 64 percent of what a high school graduate would make. Across OECD countries, the differential is still wide, at 77 percent.

While public expenditures subsidizing college tuition costs varies, the report shows countries benefit significantly from those investments in the form of future tax receipts that are generated from a college graduate’s income and wealth.

The chart below explains. (Click here for a larger image.)

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