The Opportunity Cost Of Education: Where Do The Lost Years Go?
Economists often introduce their classes to opportunity cost concepts by pointing out the additional incomes students could be earning were they employed full time rather than attending university. A potential additional cost, a reduction in years of future labor force participation, is unlikely to be mentioned. We argue that although this ‘work-life’ effect may safely be ignored in calculating rates of return to education, it must be taken into account if the goal is to correctly identify the cost of individuals’ time out of the labor force, particularly for purposes other than education. The fact that this issue was raised in a court case by a vocational analyst provides “real” life example of how this “work life” effect matters and may serve to intrigue our students and validate the study of our discipline. Our paper demonstrates the appropriate methodology and information necessary to identify work-life costs and suggests introducing the concept at introductory levels.
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