Why Not Start Younger? Implications of the Timing and Duration of Schooling for Fertility, Human Capital, Productivity, and Public Pensions

Skirbekk, V. (2005). Why Not Start Younger? Implications of the Timing and Duration of Schooling for Fertility, Human Capital, Productivity, and Public Pensions. IIASA Research Report. IIASA, Laxenburg, Austria: RR-05-002

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Abstract

The relatively long periods of time required to complete the different educational levels in countries such as Norway lead to relative lateness in the school-leaving age and in the timing of subsequent events. A late entry to the labor market involves not only social costs, such as adverse effects on public pensions, but also individual costs in the form of a shortened working life, fewer years to achieve fertility intentions, and a later timing of childbearing that may negatively affect the health of mother and child.

The individual and social costs associated with a late school-leaving raise the question as to whether similar educational standards could be achieved by shifting the timing of education to a younger age. We consider the impact of a reform that lowers the age of school graduation by two years by compressing the duration of primary and secondary schooling from 13 to 12 years and also by decreasing the age of school entry from 6 to 5 years.

By lowering the school-leaving age, the reform would also lower the age of entry to the labor market. However, according to our estimates of the effects on student performance of marginal variations in the timing and duration of schooling, the human capital effects are likely to be either nonexistent or very small. To analyze the effects of the reform, we ran projections of the Norwegian public pension system with a large-scale microbased dynamic model. We find that the reform could have an alleviating effect on the sustainability of the public pension system by reducing the aging-induced growth in the contribution rate by one-tenth in the period from 2000-2100 and by one-fifth if fertility were to increase as a result of the reform.

Policies that aim to lower the school-leaving age while maintaining educational quality could play a role in expanding and rejuvenating the labor force and may represent an important contribution to the sustainability of the public pension system in aging economies such as that of Norway.

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