Bigger Classes Reduce Future Earnings

New research from CEPR, Discussion Paper No 3397: Class Size, Education and Wages, shows that class size, measured as the pupil-teacher ratio at the school level, has a significant effect on the decision to remain in full time education beyond the minimum age. This finding is very robust and persists when school type variables, exam results and results from past ability tests are controlled for.

• Smaller class sizes, by prolonging school attendance, leads to small, but significant effects on future wages. A reduction in class size by 5 pupils would increase life cycle earnings by £3415 for males, and £2445 for females. The average benefit per pupil would therefore be £2930 (1991 prices).

• 'Considering all the evidence, we conclude that class size affects educational outcomes of teenagers in the UK by prolonging school attendance, conditional on the type of school the teenager attends' says Dr Christian Dustmann of University College London and CEPR.

• The analysis is based on data from the National Child Development Surveys (NCDS) including the latest surveys from 1991 and 2000.

• The effect of continuing to higher education is found to have a significantly positive effect on wages for men and women at age 33 and age 42, as well as for females at age 23.

• In its 1997 Manifesto the Labour Party committed itself to reducing class sizes for 5, 6 and 7 year olds. Provisional data suggests that average class sizes in primary schools in England fell from 27.7 in 1998 to 26.7 in 2001. There has also been a slight decrease in secondary school class sizes over the same period.

• In the 1998 White Paper Learning to Succeed, the current UK government recognized that there may be a link between school quality and career decisions at 16 suggesting that 'young people can be turned off higher education by poor experiences at any stage of their lives, but critical points usually occur between the ages of 13-19'.

• The authors' study incorporates the staying on decision at age 16 as the mechanism through which class size affects education level and future wages and shows that bigger class size has a significant negative effect on wages later in life. This result contradicts other studies that find no class size effects on wages, using the same data.

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