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Source: www.moe.gov.sg |
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PREMIUM ON FIELDS OF STUDY:
THE RETURNS TO HIGHER EDUCATION IN SINGAPORE |
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The rate of return for tertiary education tends to be higher compared to
nontertiary education. Professional and more technical fields of study
at university degree level also have higher rates of returns than less
technical ones. |
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These are some of the key findings of an occasional paper on ＾Premium on
Fields of Study: The Returns to Higher Education in Singapore￣ which is
the result of a collaborative study between the Ministry of Manpower
(MOM) and the Singapore Centre for Applied and Policy Economics (SCAPE),
Department of Economics, National University of Singapore. |
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The objective of the paper is to study the private rates of returns to
investment in education for workers, with particular focus on the
returns to education for various fields of study at the polytechnic
diploma and university first degree levels. |
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The study uses an econometric model involving a Mincerian-type earnings
function to estimate the rate of return to education in terms of an
increase in wages for each additional year of study. |
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The basic premise is that education enhances the productivity of a
worker, which in turn is reflected in his earnings. The estimation
controls for differences in other worker characteristics e.g. gender and
work experience, which may also affect earnings. |
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The key results are as follows: |
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a. |
The rate of return for an extra
year of schooling is positive and significant. The rate tends to
be higher for tertiary education (i.e., diploma and degree) as
compared to non-tertiary education. |
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In addition, the returns
to university education have generally increased in 2004 compared
to 2001. These findings are in line with the changing economic
structure of the Singapore economy. |
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As the economy shifts towards
higher value-added and knowledge activities, there is a greater
demand for more educated workers, which in turn enhances the
returns to higher levels of education. |
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b. |
The rates of return to
secondary and primary education, on the other hand, were broadly
unchanged in 2004 compared to 2001. |
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Less educated workers
are subjected to competition posed by low wage workers from China,
India and other developing countries as a result of the effects of
globalisation. This could have curbed their wage increases, and
hence, partly account for the lack of improvement in returns to
secondary and below education levels. |
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c. |
In general, the
professional and more technical fields of study (e.g., Law, Health
Sciences, and Engineering Sciences) at the first degree level have
higher rates of return than the less technical subjects (e.g.,
Humanities & Social Sciences). |
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Furthermore, the rates
of return for most fields of study have improved in 2004, except
for Information Technology, Architecture & Building and Mass
Communication & Information Science. |
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The fall in the rates
of return for these fields of study could be attributed to the
negative shock from burst of the dot.com bubble and the slower
growth in the construction industry. |
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d. |
At the polytechnic
diploma level, Engineering Sciences, Architecture & Building and
Business & Administration have the highest rates of return in
2004. |
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The rates of return
for all fields of study, except Health Sciences, are lower in 2004
compared to 2001. The higher rate of return for the study in
Health Sciences reflects the increase in demand for allied health
professionals. |
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The higher
demand for Health Sciences manpower is also observed with a higher
rate of return for Health Sciences graduates at the first degree
level in 2004. |
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In summary, the returns to investment in
education in Singapore tend to increase with years of schooling, with
the returns to tertiary education generally higher than those for
non-tertiary education. This is similar to the findings for other Asian
newly industrialised economies like South Korea and Hong Kong. |
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In a rapidly changing small-open
economy like Singapore, the growth of potential human capital is
crucial to attaining sustainable growth in the long-run. |
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As the structure of Singapore¨s
economy shifts towards higher value-added and knowledge
activities, there will be a continued increase in the demand for
skilled and educated human capital. |
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We can thus expect the demand for
workers with tertiary education to increase, which implies that
the rate of returns to tertiary education is likely to remain high
and above those for secondary and below education. |
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Education will hence continue to be an
attractive investment for individuals. |
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For More Information |
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The report is available online on the
Ministry of Manpower¨s website at
http://www.mom.gov.sg/mrsd/publication. |
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Source: www.moe.gov.sg
Press Release 19 Jan 2007 |
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FrontPage Edition: Fri 19 January 2007
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