Investment in education is one of the recognised means of achieving high rates of employment, economic growth and social progress. Education has two important effects on economic productivity. First, education can contribute to the development of knowledge, which translates into technological improvements and aggregate productivity gains. Second, education can increase the skills and knowledge of individual workers, allowing them to accomplish particular tasks better and to adapt more easily to changing job requirements. In a free labour market, the success of an education system manifests itself among other things in the success of the individual in finding and holding a job, as well as in the level of wages that employers are willing to pay for the skills which the individual has. The adequacy of workers' skills and the capacity of the labour market to supply jobs that match those skills are important issues for policy-makers. This chapter examines some of these interrelationships.
In recent decades, OECD countries have been witnessing an increasing demand for individuals with upper secondary and tertiary qualifications. In most countries, education policy seeks to encourage young people to complete at least upper secondary education. This development foreshadows an increasing risk of exclusion for those individuals who have not attained at least an upper secondary qualification. Indicator E1 sheds light on this by examining labour force participation rates and the unemployment rates of groups with different levels of education. As there are consistent differences in labour market conditions for different age cohorts and the genders, these are given specific attention.
The transition from school to work is a critical period for young people, when the knowledge and skills learned in formal education are evaluated by the labour market. The extent to which learning at school or university translates into workplace skills and performance, and the work habits acquired at this stage, have a considerable effect on social integration and future labour-force activity and earnings. Indicators E2, E3, and E4 examine the labour force characteristics of young people in the 15 to 19-year-old, the 20 to 24-year-old, and the 25 to 29-year-old cohorts.
On the basis of the current situation of persons between the ages of 15 and 29, Indicator E2 provides a picture of the major trends affecting the transition from school to work. On the assumption that conditions in education systems and labour markets remain unchanged over the next 15 years, it is possible to extrapolate the average number of years that today's 15-year-olds can expect to spend in various types of educational and employment situations. It is in the average duration of spells of unemployment when young people first enter the labour market which varies most between countries.
Indicator E3 examines the education and employment status of young men and women in a number of OECD countries, in the age groups 15 to 19, 20 to 24 and 25 to 29, and the overall situation for all young people aged 15 to 29. Since jobs on offer in the labour market require increasing levels of skill, persons with low attainment are often severely penalised in the labour market. Despite progress in attainment levels, many young people are unemployed. Differences in unemployment rates by level of educational attainment are an indicator of the degree to which further education improves young people's economic opportunities.
In certain countries, education and work take place largely consecutively, while in other countries they may occur concurrently. Various patterns of education combined with work can have significant effects on the success of the transition process. Working during education can occur in the context of work-study programmes or in the form of part-time jobs for out-of-school hours. As young people grow older, fewer remain in education, and fewer hence combine it with work.
Indicator E4 focuses on specific forms of employment sought by and available for young people. First, proportions in part-time and full-time employment are compared by age and gender. Then, proportions of young people employed under permanent contracts versus those in temporary jobs are compared by age group and gender. In order to assess the true scale of youth unemployment, a distinction is made in both types of comparison between those in education and those who have left school. The data show that part-time employment is favoured by the youngest age group, who are mostly still in education (combining work and study) and by women. They also show that countries differ widely in the availability of part-time jobs. There is evidence that young people appear to be given temporary contracts more frequently than older employees, which may be seen as an adjustment strategy or a mutual trial period for both employee and employer. While there has been a significant increase in the length of time spent in education, a significant proportion of young people - particularly early school-leavers - are still threatened with exclusion because they are neither in education nor at work, i.e., they are unemployed or in non-employment. The non-employment of younger age groups is a particular cause for concern, since those who have neither employed nor unemployed status do not benefit from any welfare cover.
Families and individuals also make sustained personal investments in education, thereby increasing educational standards in succeeding generations. One way in which markets supply incentives for workers to develop and maintain appropriate levels of skills is through wage differentials, in particular through the enhanced earnings accorded to persons completing additional education. The economic benefit of completing tertiary education can be seen by comparing the ratio of the mean annual earnings of those who attended and graduated from tertiary education with the mean annual earnings of upper secondary and post-secondary non-tertiary graduates. Indicator E5 shows the earnings of workers with different levels of educational attainment.