Abstract
This paper examines the education premium in Singapore. Using a large dataset drawn from the 2000 Survey on Educational Qualifications, we estimate the premium on various levels of education. The average number of years of schooling among the employed was estimated to be 10.1 years, which suggests a general increase in educational attainment when compared to earlier studies. The proportion of degree holders among the labour force has also risen from less than 5% in the early 1980s to more than 17%, currently.
Our econometric work, which makes use of the standard Mincerian human capital earnings equation, confirms a relatively high premium on higher education in Singapore. On average, a worker who invests in an additional year of education is expected to increase his earnings by 13.2%. This estimate of the premium on education falls within the range of 10-13% estimated in earlier studies done on some of the Asian countries. In addition, there is evidence of a positive "interaction" effect between education and work experience, implying that the wages of more educated workers increase at a faster rate than those of the less educated, as work experience increases. The results indicating a strong premium on post-secondary education and beyond imply that it is rational for individuals to invest in education.
The standard Mincerian equation was also estimated separately for subgroups of data, segregated by industry and occupation types. We find that, in general, the premiums on education and work experience tend to be higher among the industries with a higher proportion of higher skilled workers (such as the financial intermediation industry), as well as among white-collar jobs (such as professionals and managers).
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