January 1, 1994

A qualification standard in undergraduate education

Problems on the labour market are concentrated with the unskilled and low skilled: participation is low, disability is high, the wage is low, unemployment is high.

Additional education may bring about an improved situation. Pleas for measures in this field are frequently being supported by the argument that schooling promotes economic growth. This Working Paper reports on an investigation into the macroeconomic consequences of compulsory additional education for those youngsters who would otherwise leave the schooling system with little qualification. MIMIC, the applied general equilibrium model of the Central Planning Bureau, was used to estimate the major macroeconomic costs and revenues. Initially there is a negative impact on the level of private production, ensuing from the reduction in the availability of labour, both unskilled (because there are additional pupils) and skilled (because additional teachers are needed for their education). On the other hand, the quality of the labour force will advance at a higher rate during half a century, leading to faster output growth. The results indicate that the pay back period of this investment in human capital is very long, and its rate of return seems to be low. The justification for the measure must be found in the improved labour market position of the unskilled rather than in favourable macroeconomic consequences.

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