The financial returns for college graduates have decreased in recent years, according to a study by the Philippine Institute for Development Studies (PIDS).
In a policy note titled “Returns to Education in the Philippines (2005–2022): Declining Benefits, Increased Inequities,” PIDS researchers found that the return on investment for college graduates dropped from 141.4 percent in 2010 to 93.7 percent in 2022. In contrast, individuals without any completed education have not recorded a similar decline.
“There is a general narrowing of the returns between educational levels, but this is most pronounced between secondary and partial college completion; in 2018, the returns to these two categories were in fact at par,” the researchers said.
However, PIDS noted a convergence in returns between those with secondary education and those with partial college completion, indicating that the benefits for individuals in these categories have become similar over time. Returns to education refer to the various advantages individuals gain by investing in their educational pursuits through formal qualifications.
PIDS also highlighted increasing inequities among college graduates, revealing that higher returns were observed for high-wage workers in both 2019 and 2022, compared to their low-wage counterparts. The study found that returns for low-wage graduates had declined by 64 percent in contrast to those in the higher-wage bracket.
“This reverses previous findings that suggested higher education provided greater benefits for low-wage graduates,” it said.
The researchers cited the quality of education as one of the reasons for declining returns among learners, such as inadequate resources, overcrowded classrooms, and a need for more qualified teachers.
“These factors can lead to suboptimal learning outcomes, ultimately reducing the value of education in the labor market,” they stated.
They also emphasize the relevance of educational programs to the evolving needs of Industries, wherein they said that the skills imparted by educational institutions may not match labor market demands leading to declining returns to education.
PIDS suggested that policymakers have close collaboration with industry partners to ensure that graduates possess the relevant skills and align educational expansion with economic measures.
“This involves implementing policies and incentives that encourage the development of high-skill jobs, fostering innovation, and promoting entrepreneurship,” it said.
The PIDS study was based on the Labor Force Survey from 2005 to 2022, wherein the full sample comprised of 621,638 individuals, with a subsample of 185,020 salaried graduates aged 25 to 34.