Return on Education Using the Concept of Opportunity Cost

Abstract

Education is an important part of individual life. Everyone is learning whether realizing it or not. There is pressure for a longer period of formal education due to the growing volume of knowledge and the need to use it in working life nowadays. In connection with new technologies, there is a need for growing population with tertiary education, but there is also a need for a skilled workforce with appropriate vocational training achieved by upper-secondary education. Formal education takes place mainly in the full-time form, which makes it necessary to give up the possibility of earning income from classic employment relationship. Improving employability at labour market and possibility to get higher net income, forces individuals to stay at education for longer time and to sacrifice possible incomes during the time. Therefore, education is analysed as opportunity costs and the payback period of education is assessed with respect to the increase in the net mean income. The results of the analysis carried out according to data from the Member States of European Union show significant differences in the opportunity cost and in the return on education as investment, both, for tertiary education and for upper-secondary education.