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Spain´s wage premium is the OECD´s lowest

A recent OECD publication revealed an alarming fact about Spain: that the premium to a higher education –the so-called “wage premium”– is the lowest in the OECD.

The figure compared the internal rate of return to a higher education with its cost as a way of calculating the incentives faced by university studies in each OECD country. In Spain, this rate of return to higher education was less than 5% a year for men, the lowest wage premium in the OECD.

For women the rate was slightly higher at around 6%, and it placed Spain 7th from the bottom spot among the 22 countries in the study.

The news of the low wage premium to higher education is of particular concern in Spain, where low productivity is a chronic problem and education is often proposed as the key solution. If obtaining a university education is not attractive in monetary terms, the incentives for young people to choose a higher education are poor, and there will be little impulse for the human capital formation process that is so key to raising national productivity.

And since productivity is the main determinant of income, Spain appears locked in a vicious circle that may prove very difficult to break.