The returns to returning to school

Abstract

Purpose This work examines the returns to education for workers who pursue additional education after time out of the labor force. It compares those who remain in the labor force during additional education with those who drop out of the labor force during additional education. It compares two cohorts of the National Longitudinal Survey of Youth (NLSY). Design/methodology/approach This work utilizes a difference equation to estimate the returns to education for workers who pursue additional education after time spent out of school and in the labor force. Findings The results indicate a sheepskin return of approximately 14% for those who remain in the labor force and a return of approximately 9% to years of additional education for those who drop out of the labor force. This contrasting pattern of returns is robust to sample selection correction and a variety of checks. Research limitations/implications This work does not fully account for all threats to causation. Further research could pursue these and make use of data from more clearly defined periods of education. Practical implications This work finds key differences between the internal labor market faced by those remaining in the labor force and the external labor market faced by those dropping out of the labor force. A policy focused on re-training workers should account for these differences. Originality/value This is the first work to compare workers who pursue additional education while remaining in the labor force to workers who pursue additional education and drop out of the labor force.