Returns to Education and Youth Labour Force Participation

Abstract

This paper examines the returns to education and their effect on youth labour force participation. It examines trends in the labour force and changes in school enrolment rates. The review of the literature provides a background on returns to education and various models used in estimation. Using data from the Survey of labour and income dynamics and the labour force survey, estimates on returns to schooling are measured. The model adopted in the empirical section is the basic Mincer model of log-earnings based on education level, experience and experience squared. Estimates for returns to education were between 9.6% and 11.2% for males, and between 11.1% and 16.7% for females. In recent times, there have been policy changes forcing youth to attend school until the completion of high school or age 18 in Ontario. This policy highlights the value of education in today's labour market. Education is one factor that is causing a downward shift in the labour force participation rates for youths.