The Impact of the Expansion of Higher Education on the Rate of Return to Higher Education in Taiwan

Based on the SRDAFootnote 4 database, various fields of study were divided into the following ten categories: humanities, law, business, science, engineering, agriculture, health care, military/law enforcement, education, and others. In this study, we used agriculture (with the lowest average wage in 2016) as a reference point by which to compare the rates of return to higher education in different fields of study.

Table 7.3 and Fig. 7.2 list the estimated rates of return to higher education in the 0.5 quantile from 1994 to 2016. These results show that—over the 20-year period of educational reform—employees who obtained education enjoyed the highest average rate of return at 23.8%. Looking back at 1994, health care, education, and humanities had the highest rates of return; whereas engineering, business, and military/law enforcement had the lowest return rates. Over the last 5 years, all fields have seen significant decreases in their rate of return to higher education (except for military/law enforcement where the decline has been far less pronounced). For 2016, law, military/law enforcement, and education enjoyed the highest rates of return, whereas business and engineering saw the lowest rates.

Table 7.3 Rates of return to higher education in the 0.5 quantile for various fields of study

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Fig. 7.2

The rates of return to higher education from 1994 to 2016 in various fields of study

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Overall, the rates of return to higher education in most fields of study were unstable or declined during the period from 1994 to 2016. However, the return rates for military/law enforcement grew steadily, whereas the rates for health care remained largely unchanged.

Tables 7.4 and 7.5 compare the quantile regression coefficients in various fields of study using estimates for five quantiles for the years from 1994 to 2016.

Table 7.4 Quantile regression coefficients in various fields of study for five quantiles in 1994

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Table 7.5 Quantile regression coefficients in various fields of study for five quantiles in 2016

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In 1994, among lower-income workers, those in the fields of education, humanities, law, and health care enjoyed higher rates of return to higher education. Among higher-income workers, those in the fields of law, science, and health care enjoyed higher return rates. In the field of health care, we observed a significant difference between higher- and lower-income workers in terms of the rates of return to higher education.

In 2016, among lower-income workers, those in the fields of education, military/law enforcement, and health care enjoyed higher rates of return to higher education. Among higher-income workers, those in the fields of law, military/law enforcement, and health care enjoyed higher return rates.

Table 7.6 summarizes the regression results for the 0.5 quantile in the various fields of study in 2016. Overall, these results indicate a positive correlation between education level and income. Work experience, region, gender, and marital status also demonstrated significant relationships with income. Specifically, employees earning higher wages were those with more work experience, those located in six specific municipalities (the largest cities in Taiwan), males, and married individuals. The square of job experience was negatively correlated with wages, which is in line with the assumption of Mincer’s human capital model.

Table 7.6 Regression results of rates of return to education in various fields of study in 2016

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In summary, our results indicate that education, work experience, location in urban areas, being male, and marital status are all significantly correlated with income level, whereas the square of work experience is negatively correlated with income level. During the last 20 years of educational reform, the overall rate of return to higher education has gradually declined, regardless of the field of study. On average, the fields of law, humanities, and military/law enforcement enjoyed higher relative return rates. It is also worth noting that the field of health care had high rates of return among higher-income workers. Military/law enforcement was the only field that demonstrated steady increases during this period, perhaps due to the government’s decision to provide financial support for students enrolled in police academies beginning in 1993.