The Onlne Journal of New Horzons n Educaton Volume 4, Issue 3 MargnalReturnstoEducatonForTeachers RamleeIsmal,MarnahAwang ABSTRACT FacultyofManagementand Economcs UnverstPenddkanSultan Idrs ramlee@fpe.ups.edu.my Theobjectveofthspaperstoestmateaprvaterateofreturnstoeducaton forteachersnmalaysa.usngnformatonfromteachers surveyformorethan 5000 respondents, we deploy the Mncer s wage equaton usng an ordnary leastsquare(ols)asahomogenousreturnmodel.thefndngndcatesthatthe prvaterateofreturnstoschoolngforanaddtonalyearofschoolngsabout5 percent.thsresultslowercomparedtotheprevousestmatonformalaysa. Furthermore,themargnalreturnsshownthatthedfferentlevelsofteachers tranngobtanedthedfferentreturns.thosewhocompletedteacherstranng wthhghercredentalarelkelytoenjoyahgherreturn.thsresultsreflectng asheepskneffectnalabourmarket.however,asgnfcantlywagedfferentby level of academc attanments s a result from government polcy to rase teachers ncomeandskllbyncreasngtherlevelofacademcqualfcaton. Keywords:returnstoeducaton,humancaptal,schoolng INTRODUCTION AfewstudesofreturnstoschoolngnMalaysashownconsstentresults.Hoerr(1977),Mazumdar(1981)and Lee(1980)concludedthattheearnngsvaratonnhumancaptaltheoryslargelyexplanedbyeducaton.Chapman andhardng(1985),blau(1986),gallup(1997),chung(2004)andzanzam(2013)wereestmatedtherateofreturns toeducaton.however,theresultsoftherstudeswerenconsstentduetomethodologyandsamplewasdfferent. The lmted data and resources, and to some extent the choce of schoolng and earnngs varables, also gve a dfferentcoeffcentsofreturnstoschoolng.furthermore,prevousdataandanalyssonreturnstoschoolngwere hamperedbyrelatvelyfewobservatonsandotherdatanadequaces.therefore,thspaperoffersanestmatebased onteacherssurveydata.itwllprovdenewevdenceofreturnstoschoolngusngthelatestdatasetnpartcular,to estmate the average return for an addtonal year of schoolng for teachers. In Malaysa, the educaton system consstsofpreschool,prmaryschool,secondaryschoolandhgherlearnngnsttutons.prmaryeducatonstartsat sevenandendswthnsxyears.allstudentsareautomatcallypromotedtosecondaryschoolaftercompletonofsx yearsnprmaryschool.thenormalduratonofsecondaryschoolngsfveyearsbuttsdvdedntotwolevels.level onereferstoform1,2and3(lowersecondary)andleveltworeferstoforms4and5(uppersecondary).theupper Secondary Educaton offers choces to students to fulfl ther needs, sklls and nterests n career development, ncludngeducatonsectoraftercompleteduppersecondaryschool.thosewhoarecompletedthslevelofschoolng attanment wth a hgh achevement have the opportunty to apply as teacher s tranng at the hgher learnng nsttutons.meanwhle,postsecondaryeducatonoffersschoolleaversorstudentstheopportuntytocontnuether studesaftercompletngfveyearsofsecondaryeducaton.formsxeducatonsacontnuatonofthefveyearsof academcschoolngthathelpsstudentstopreparethemselvestoqualfytogototheunversty.ittakestwoyearsto complete the postsecondary educaton ether n the scence or the arts stream before the student can st for the HgherSchoolCertfcate(HCE),conductedbytheMalaysanExamnatonCouncl.Meanwhle,hghereducatonoffers varoustypesofcoursesrangngbetweenfourtosxyearstocomplete.atthspont,forthosenterestednteachng carrercoulddosobyapplyngpostdplomaneducaton.therefore,schoolngattanment,academcqualfcaton andtranngamongteachersaredfferentwhchsbecomeourmotvatontoofferestmatonamargnalreturnto teachers. METHOD Theemprcalanalyssofthsstudyusesthestandardhumancaptalearnngsfunctontoestmatetherateof returntoteachersnmalaysa.accordngtocard(2001),thspathbreakngworkwasextensvelyusedbyeconomsts asaneconometrcapproachtoestmatetherateofreturntonvestmentneducaton.themodels; W S Exp Exp (1) 141
The Onlne Journal of New Horzons n Educaton Volume 4, Issue 3 W whereln S slogearnngs, Exp syearsofschoolng, sthepotentalexperenceofndvdual,and s wellbehaved error term. Due to the absence of the completed data on experence, Mncer (1974) proposed the potentalexperence,.e.thenumberofyearsndvdualacouldhaveworkedaftercompletngschoolngandthen, S assumng that he/she starts schoolng at 7 years old and begns workng mmedately after of schoolng, hence Exp sequaltoa S 7(Age YearsofSchoolng 7).RunnngthesmpleOrdnaryLeastSquare(OLS)regressonto the above equaton, one can estmate the coeffcent as the average of prvate rate of return to schoolng Exp (Wess,1995).Thelasttermoftheequaton, representstheexperencesquaredtocaptureaconcavtyofthe observedearnngsprofle.theestmatonoftheparameters 1 and 2 wllbecomepostveandnegatverespectvely. The earnngs varable n equaton (1) makes use of the logarthm form because the dstrbuton of log earnngssveryclosetoanormaldstrbuton,especallyloghourlywages(card1999).inaddton,tspreferableto usethelogtransformatonbasedonthesuccessofthestandard(semlogarthm)humancaptalearnngsfuncton (Wlls 1986). For the purpose of ths study, the dependent varable wll use monthly earnngs as reported by the survey.the standard wage equaton can be used to estmate the average rate of returns to dfferent levels of schoolngbyconvertngthecontnuousyearsofschoolng(s)todummyvarableswhchrepresentthedfferentlevels ofschoolng.afterfttngschoolngdummes,theextendedearnngfunctonwllbe; W CERT DIP DEG Exp Exp (2) Usngtheaboveequaton,wecanestmatethereturnsforeachleveloftranng.Theparametersarederved fromtheformulae;, and aretheparametersnourmodel. RESULTS Thsstudysusesprmarydatacollectedfromtheteachers survey.thesampleconsstsof5672teachers.the mean annually earnngs are MYR43, 281.49. Meanwhle, the mean of schoolng, certfcate obtaned, age and experenceare15.44,2.97,38.60,and16.203yearsrespectvely.thereturntoschoolngnthehomogenousreturn modelsconstantacrossndvduals.thefrstemprcalresultsweredervedfromtheestmatonusngequaton1as presentedbytable1.theaverageprvaterateofreturnforanaddtonalyearofschoolngwas5.3percentforoverall for teachers. In other word, holdng all other ndependent varables constant, an addtonal year of schoolng s assocatedwtha5.3percentncreasenannuallywages.smlarly,anaddtonalyearofexperencesassocatedwth a3.7percentncreasenannuallywages.wththeexceptonofthedummyforgender(male=1),allparametersare sgnfcant at 0.05 levels or better. The results show the data are consstent wth the basc human captal theory. Schoolngandexperencearepostvelycorrelatedwthearnngsbutexperencesquaredsnegatvelycorrelated.The averagereturntoschoolngbasedonahomogenousreturnmodelforteachersslowerthantheaveragereturnfor Malaysa,whchs10.54percent(Ramlee&Marnah,2013).TheprvaterateofreturnsforAsaasawholen2004 was 9.9 percent (Psacharopoulos and Patrnos, 2004). Nevertheless, t s low compared to the Asan Tgers, for example,sngaporewthanaveragereturnof13percent(psacharopoulos,1994;sakellarou,2003). 142
The Onlne Journal of New Horzons n Educaton Volume 4, Issue 3 Table1:PrvateRateofReturnstotheTeachers,Mncer smodel Varables Overall Certfcate Dploma Degree Post Degree Constant 9.310*** 9.563*** 9.140*** 9.629*** 9.343*** (.021) (.063) (.040) (.066) (.096) Schoolng.053***.038***.058***.036***.050*** (.001) (.002) (.002) (.004) (.006) Exp.037***.031***.047***.038***.036*** (.001) (.0016) (.003) (.003) (.003) Expsq.000***.000***.001***.000***.000 (.000) (.000) (.000) (.000) (000) Male=1.008.018.011 0.030**.001 (.006) (.012) (.000) (.013) (.013) Marred=1.017*.022.008.026*.009 (.009) (.019) (.020) (.016) (.017) Tenure=1.0794**.017.008***.036.024 (.027) (.012) (012) (,013)*** (.013)* Rsquared.544 0.346.622.598.542 F 977.39 98.89 347.24 279.17 542.83 Observatons 4983 1127 1271 1134 1375 Standarderrorsnparentheses. ***Sgnfcantat1%level. **Sgnfcantat5%level. The study estmates the multple treatment effect from the equaton (2). The results show that nearly all educatoncoeffcentsarestatstcallysgnfcantatthepontofestmatonof0.01levels,ndcatngthatthepartcular educatoncredentals varablesaredfferentfromtheestmatesfortheomttedvarables(certfcate).table2shows that return to ndvduals tranngs of those who had completed dploma level (as compared to those who had teachngcertfcate)ncreasedto0.120percentageponts.smlarly,atthehgherlevel,returnsforhghereducaton werencreaseddurngthetmeofthesurveyswhchmadetheearnngspremumofaround0.4percentagepontsas comparedtotheomttededucatonaldummy. 143
The Onlne Journal of New Horzons n Educaton Volume 4, Issue 3 Table2:MargnalReturnstoSchoolng Varables Coeffcents (Std Error) Constant 9.805*** (.012) Exp.039*** (.001) Expsq.000*** (.000) Male=1.007 (.006) Marred=1.016 (.009) Tenure=1.025*** (.006) Dploma.120*** (0.11) Degree.414*** (.009) Master.484*** (.015) Rsquared.553 F 759.322 Observatons 4913 The credentals coeffcents from Table 2 can be transformed to percentage returns for those undertakng dfferent levels of educatonal tranng. Fgure 1 shows the margnal gross of returns to years of schoolng. The augmented Mnceran earnngs functon ftted well when usng years of schoolng dummes and other controllng varables. The reference varable was secondary educaton. All dummes for schoolng are statstcally sgnfcant dfferent except for martal status and gender. Indvduals wth dploma level educaton had ncreasng margnal returnscomparedtothosewhohadsecondaryeducaton.themargnalgrossreturnstoqualfcatonforndvduals whocompletedatthslevelwere4.0percent.themargnalgrossreturnfordegreeeducatontodplomaeducatons ncreased by about 9.8 percent for an addtonal year of schoolng. For those who completed master degree, addtonal returns of between 1.9 and 2.3 percent, compared to degree level, were receved. For all levels of educaton, the hghest returns were obtaned by those who completed at degree level. The addtonal returns for thosewhocompletedatdegreelevelcomparedtothosewhocompletedatdplomalevelareabout10percent. 144
The Onlne Journal of New Horzons n Educaton Volume 4, Issue 3 12 10 TheresultsndcatethattherearehghandpostveprvatereturnstoteachersnMalaysa,especallyathgher levels of educaton. The fndngs support the prevous studes (for example by Chung, 2003 & 2004; Ramlee & Marnah,2013).Furthermore,ourresultsshowedthatmargnalgrossreturnstoeducatonatsecondaryeducatonare low,consstentwththefndngsbylee(1980),lee&svanthran(1992)andchung(2003&2004).meanwhle,the overallreturntoteachersshgherthanthosewhoarenvolvednmanufacturngsectornmalaysa.zanzam(2013) reported that the return for an addtonal year of schoolng for manufacturng sector s about three percent, two percentlowerthanteachers return.thepatternofmargnalgrossprvaterateofreturnstoschoolngprovdesalttle evdence of the sheepskn effect n the Malaysan labour market, whch s refers to the prvate rate of returns to educaton certfcates rather than the accumulated years of schoolng (Belman & Heywood (1997). It reflects the labourmarketrecognzngqualfcatonasarequrementnpreferencetoyearsofschoolng.moreover,certfcates could be beng used as a screenng devce for the employer n the compettve labour market. Therefore, f ths hypothess s true, the best choce for the ndvdual n terms of nvestment n educaton s to obtan a certfcate ratherthanmerelytocompletemoreyearsofschoolng.forexample,thosewhocompletedthereducatonatform5 (Year 11) wll obtan the Malaysan Certfcate of Educaton. However, those who completed 11 years of schoolng (uppersecondary)butddnotobtanthemalaysancertfcateofeducaton(mce),wereforcedtoacceptjobswtha lowerqualfcaton(forexample,lowercertfcateofeducaton wth9yearsofschoolng).therreturnswllreflect thsqualfcaton.however,annvestmentnanextrayearofschoolngdoesnotgveanyhgherreturn.infact,the fndngrevealsthatthereturncouldbedecreased.inordertogethgherreturns,he/sheshouldaddonemoreyearof schoolngandobtanedthenextlevelofcredental.wthahgherqualfcaton,.e.hgherschoolofcertfcate(hsc), theresultsshowedthattheymaygetmorereturnscomparedtothosefromtheearlerstagesofeducaton. CONCLUSION TheaverageprvaterateofreturnforanaddtonalyearofschoolngforteachersnMalaysawas5percent.An addtonalyearofexperenceworkhasncreasedearnngsby3percent.thereturnstoqualfcatonhaveshownan nclnngtrendwhchsthehgherlevelofschoolngenjoyedahgherreturnandwasstableovertmecomparedto thelowerlevelsofschoolng.tosumup,thefndngsofthsstudyareasfollows.frstly,wefoundtheaverageprvate rateofreturnsforteachersshalfofthemalaysanaveragereturns.secondly,whenthereturnswereestmatedusng qualfcatons(oryearsofschoolng)thefndngssgnfyanonlneartynreturn.theaveragereturnstoqualfcatons oryearsofschoolngdfferedamongndvduals.thosewhocompletedacertanlevelofschoolngbutddnotobtan anaddtonalqualfcatonddnotshowthesamereturnsasthosewhocompletedthesamelevelofschoolngand whosecuredaqualfcaton(orcertfcate).ifthswasndeedafeatureofthemalaysanlabourmarket,tmaypartly explan why workers wth the same years of schoolng receve dfferent returns; the evdence s consstent wth credentalshavngbeenusedasascreenngdevce. 8 6 4 2 0 REFERENCES SecondaryEducaton vsdploma DplomavsDegree Belman, D. and Heywood, J. S. (1997) Sheepskn Effects by Cohort: Implcatons of Job Matchng s a SgnallngModel,OxfordEconomcPapers49(1997),623637. Masters/PhDvs Degree 145
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