CEE DP 115 The Changing Economic Advantage From Private School

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the publisher nor be issued to the public or circulated in any form other than that in which it is published. Private schools in the UK, though far less numerous than state schools, have for a long time played a very prominent role in the UK " s economy and society. There is ample evidence that private school attendance generates significant economic advantages later on in life as individuals earn more in the labour market and are more likely to get top jobs. But we know very little about how the economic and social impact of private education has evolved. In this paper we provide empirical evidence on the extent to which private/state school wage and education differentials have changed over time. Rising wage inequality and falling social mobility form the backdrop. Reasons to expect an increasing advantage for private school pupils over the last several decades include the internal transformation of private schools with an increasing emphasis on academic achievements, and the substantive rises in the resources available, supported by increasing real fees which, in the context of the emergent knowledge economy and rising female labour force participation, parents were willing to pay. Using data from the National Child Development Study and the British Cohort Study, we examine how pupils born respectively in 1958 and 1970 were faring in the labour market by the time they had reached their early 30s. We show that the private/state earnings log wage differential rose significantly from 0.07 to 0.20 points (and thus the premium rose by 15 percentage points) between the two cohorts, after controlling for family background characteristics and for tests of cognitive and non-cognitive skills that they possessed at an early age. We also find that the private/state gap in the chances of gaining a higher degree rose from 0.08 to 0.18 between the cohorts. Our estimates imply that half the rise in the earnings differential can be attributed to the improved qualifications being achieved in private schools. These results are reinforced by similar findings based on successive cohorts in the British Household Panel Study. Since the composition of private school participants – from the perspectives of parental income, demographic characteristics and early-age test scores and non-cognitive skills …