(Vidya Mahambre is professor of economics at Great Lakes Institute of Management and Sowmya Dhanraj is assistant professor of economics at Madras School of Economics. The article was first published in Mint on September 21, 2021)
- Despite consistently rising unemployment, youngsters continue to invest in education because over their lifetime, they expect to earn more compared to people with low education. Educated workers may earn more not only because of education per se, but also because of other related traits such as superior abilities, ambition, diligence and better endowments like parental resources and status, all of which affect enrolment in higher education. Their earnings thus reflect a combination of these and other socio-economic factors. Nonetheless, how much more people with higher levels of educational attainment earn at the start of their career, and how their lifetime- earnings’ trajectory changes vis-à-vis those with lower educational levels, are vital to understand returns on education. To investigate gaps in the earnings of two groups—the college-educated versus others—we ideally need data on earnings over their working lifespan. In the absence of such time-series data for India, however, we have adopted a simple but suitable alternative method.