Returns to Education For Graduates of Private Education Institutions

The private education sector exists alongside the public education sector, and provides education options to some Singaporeans. It offers perse courses, some of which support workforce development. At the tertiary level, private education institutions (PEIs) offer an alternative route to a university degree. However, the returns to education in terms of earnings may differ between the graduates of PEIs and the local autonomous universities (AUs). For instance, a recent PEI graduate employment survey (GES) found that degree graduates from private schools lagged significantly behind their peers from the AUs in the job market.

This study offers new insights on the monetary returns to PEI and AU degrees, using administrative data on earnings, and accounting for differences in graduates’ academic ability, course choices, demographic and socio-economic characteristics when examining their wage outcomes. The findings suggest that AU graduates enjoyed, on average, a 28 per cent premium in starting wages compared to PEI degree graduates after controlling for differences in the characteristics of the PEI and AU graduates. Furthermore, the AU wage premium was observed for graduates across the 25th, 50th and 75th wage percentiles. Differences in institutional and course quality, as well as potential signalling effects and employers’ perceptions of the degrees could have contributed to the wage gap between the graduates of PEIs and AUs who have the same observable characteristics.

As this study only examines starting wages, an open question is whether the wage premium persists over a longer horizon. Furthermore, any decision to pursue a degree from either a PEI or AU would need to take into account other factors such as the amount of course fees to be paid, the opportunity cost in terms of the earnings foregone during studies, as well as any non-monetary benefits of education. Each prospective student will thus need to weigh the benefits and costs carefully in order to make a more informed decision regarding his or her own educational investments.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry, the Ministry of Education (MOE) or the Government of Singapore.

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