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Social Research

Review of the social and non-market returns to education

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  • Release date: 1 July 2004
There are three distinct ways of defining returns to education. These are the private return, the social return and the labour productivity return.

Here, we are most interested in the direct/private and indirect/social non-monetary aspects of learning, which are called ‘non-monetary returns’. Non-monetary returns, along with economic returns (forming human capital) are one of the important contributors to GDP both directly and indirectly.

Non-market returns are the combination of Private non-market effects and Community non-market effects. Measurement and methodology remain fundamental issues of concern to researchers. In the US the agreed approach is to measure education in terms of years of schooling while in the UK measurement is based upon qualifications gained. Education relates to wider economic and social effects and human welfare depends partly on earnings but also on moderation of crime costs, slower population growth, less poverty, a cleaner environment and other non-monetary outcomes that all trace back to education in various ways. Positive relationships between education and health, the health of family members, the schooling of one’s children, life choices made, fertility choices and infant mortality exist. Education also has a positive effect on the environment and has a strong correlation in crime reduction.

Education involves both costs and benefits to individuals and society.  Individuals incur two types of costs (out of pocket and foregone production) while society incurs public subsidy and spillover effects in productivity.  The benefits to individuals of education are said to be increased market productivity (and therefore increased wages) and private non-market effects.  Society benefits with gains in technology and community non-market effects.

This report explains what the non-market returns (or benefits) from education to individuals are.

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