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The article presents a summary of the study which assessed the value of additional years of schooling for the non-academically inclined youth in Australia. It is often argued that increasing the level of schooling accumulated by young people should be a policy objective, possibly through increased school retention rates or by raising the compulsory level of schooling. Sometimes this argument is grounded in theory, such as the increasing importance of education due to skill-biased technological change and other changes in the nature of the labour market. In the case of years of schooling it is clear that individuals with positive labour market characteristics, most notably academic ability, accumulate more years of schooling. In estimating the effect of years of education on earnings the economic literature has gone to great lengths in attempting to disentangle these various effects and to isolate the true marginal impact of years of education.

The article discusses the effect of years of schooling upon the likelihood of being employed, conditional upon participation in the labour force in Australia. This is quantitatively identical to modelling the probability of being unemployed, however, modelling the probability of employment retains consistency with previous results in that a positive coefficient on the years of schooling variable means that additional years of schooling have a beneficial effect. In the wage equations, a variable for years of work experience was included. This is problematic in models of the probability of being in employment as there will be a high degree of endogeneity, or reverse causality, between the measure of years of work experience and the dependent variable.

The article discusses the effect of additional years of schooling on earnings in Australia. A standard earnings function would incorporate among the explanatory variables gender, age, marital status and human capital variables. Measures for human capital may include years of education or qualifications, labour market experience and possibly health status. For the purposes here, it would be ideal to include a variable on years of education, however it is quite difficult to extract the precise number of years of post-school education using the Longitudinal Surveys of Australian Youth data. Wage equations for the hourly wage for all workers and the weekly wage for full-time workers are estimated. Only jobs observed for persons who have left school are included.

The article provides information on the determinants of school retention in Australia. Two criteria are utilised to distinguish between school leavers who completed the final year of secondary school and those who did not. A principal components analysis was carried out to identify linear combinations of the responses that could be used to summarise the patterns of responses between individuals. From the perspective of modelling the effects of further years of education on labour market outcomes, it is encouraging that the data contain robust controls for ability, plus a number of potential instruments which are robust in determining school retention but which may not otherwise be expected to be associated with labour market outcomes after controlling for ability.

The article discusses the estimation of the returns to schooling of youth in Australia. Few relationships in economics have attracted a greater degree of empirical scrutiny than that between years of education and labour market outcomes, and more specifically between years of education and earnings. The dominant theoretical framework for assessing the returns to schooling and education is Human Capital Theory. The observed relationship between education and earnings thus appears simply because educational qualifications are used as a signaling device to allocate better workers to higher earning jobs. The use of earnings as the outcome variable presents an added complication in that observing earnings is conditional upon the individual being in work.

The article provides an overview of school to work transition in Australia. There are three main roles of schools. The relative importance of these roles shifts over the schooling period. This includes the options of directly entering the workforce or of raising earnings potential by entering other channels of vocational education and training. The net present value of the gains from additional years of schooling will eventually begin to decline. The optimal number of years of schooling for an individual will not be fixed but will fluctuate with economic conditions, the prevailing technology and the supply and efficiency of alternative pathways. Schooling is compulsory until the age of 15 in all states in Australia. Apprenticeships were a major pathway from school to work in Australia, particularly for males and early school leavers.

The article assesses the value of additional years of schooling for the non-academically inclined youth in Australia. Schooling plays several important roles in society, and the relative emphasis between these roles shifts as students progress through their school life. The optimal number of years of schooling will slowly change as a result of structural and technological change in the pattern of production, and will fluctuate with macroeconomics conditions, with the youth unemployment rate in particular. More generally, a correlation between labour market outcomes and selection into further schooling and education, or synergies between ability and education, may lead to over-estimates of the benefits of extra years of schooling if these are not adequately controlled for in the estimation.