When Children’s Skills Predict Their Adult Earnings

Education - Health

This article was previously published in the Ideas Matters Blog, on June 7, 2017.

What are the critical factors that allow people to accumulate skills from childhood to adulthood?

Providing the right answers to that vital question is key not only to ensuring individual well-being and prosperity. It also makes all the difference in nurturing generations that increase productivity, foster growth, and reduce poverty for Latin American and the Caribbean as a whole. That is why the Research Department of the Inter-American Development Bank is dedicating its upcoming flagship report to empirical evidence of cost-effective ways to boost skills.

Among other approaches, the book, Learning Better: Public Policy for Skills Development, examines how different interventions that improve aptitudes in the young later affect their earnings as adults. This kind of analysis, which assumes that wages are linked to productivity and productivity to skills, provides a fascinating window into the learning process. It shows how education and support for skills development from the earliest ages can have a snowball effect, dramatically improving results down the line.

Social scientists have long assumed, for example, that programs that teach parents how to provide the right intellectual and emotional stimulation to very young children through talk and play might kick-start development. But where is the proof? Our reviews of several such parenting programs in Latin America and the Caribbean show that such programs have substantial cognitive effects. In one program, they increased adult earnings among beneficiaries – compared to a control group – by 25%.

Enrollment in primary school is nearly universal in Latin America and the Caribbean. High quality is not. How might improving teaching at that stage of schooling affect students and their eventual ability to earn a good wage? We review one study that shows that shifting a student from an average teacher to a teacher in the 84th percentile of teacher quality distribution in one grade can increase adult earnings by 1%. And those gains may grow if improvements in teacher ability continue through the years of elementary school.

With adolescence comes other challenges, including the temptations of recreational drugs, unprotected sex, and criminal behavior. But two programs, reviewed in our study, show that mentoring and academic support can guide teenagers to a safer place. They can increase teenagers’ eventual earnings as adults by one to three percent for every year of help.

The key lies in finding out what works and what doesn’t and insisting on evidence-based intervention. This is why our conclusions mainly rely on studies of large-scale governmental interventions and always on those with rigorous methodologies.

What emerges clearly from the report is that education is important throughout the life cycle; that support from parents and mentors can make a difference; and that the quantity and quality of education are critical. All of these elements are reflected in adult earnings. Consider a few other discoveries: every additional year of secondary school leads to a 5% increase in adult earnings; every year of additional post-secondary education increases those earnings 11%; and a university degree in a career related to science, technology, engineering or math, increases earnings 11% per year of study more than a degree in the social sciences.

Earnings are not the only measures of skills development; we consider test results and many other ways of judging progress. Still they are a good proxy. They give a concrete sense of how policies and programs can set kids and teenagers up for success or failure when it comes to the inevitable challenges of making a living in the modern economy.

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