Education, Skills, and Labor Market Outcomes: Evidence from Pakistan

Understanding the nature of education-earning relationship within Pakistan while considering the implications of findings for the policy making process.

The paper aims to ascertain the education-earning relationship in Pakistan by examining the returns to labor as a result of education, literacy, numeracy skills and cognitive skills while also analyzing the trends in earning distribution and returns to education. Data generated from Pakistan Integrated Household Surveys of 1998–99 and 2001–02 is analyzed through the application of multinomial logit models and regression analysis and the results indicate that education has a profound impact on occupation and level of earnings. However, data reveals evidence of gender disparity and despite the fact that women have a higher marginal return to education and begin to take advantage of their skills early in life; they continue to face discrimination by employers in the job market.

Results from education-earning analysis reveal that that the relationship of the variables is convex which indicates that providing education at lower level does not bring about a rise in earnings and therefore is not an appropriate policy for reducing poverty. Education is found to reduce the earning inequality between women as women with fewer abilities have a higher rate of return as opposed to women with better skills and abilities. The paper concludes that literacy allows individuals specifically males to enter into lucrative markets whereas it also enhances the earning power especially of females. The author recommends that in light of results, increasing focus should be placed on girl’s schooling and improving the quality and accessibility of higher levels of education.