What determines the return to education: An extra year or a hurdle cleared?

The 1973 Raising of the School Leaving Age from 15 to 16 has been used to identify returns to years’ schooling. However, because the first set of “high stakes” exams are taken in the UK at age 16, the reform affected the proportion with qualifications, as well as schooling length. In order to shed light on whether the returns reflect the extra length of schooling or the increase in qualifications, we exploit another institutional rule – the Easter Leaving Rule – which we argue only affected the probability of obtaining qualifications (and not the length of schooling). We find sizeable returns to academic qualifications – increasing the probability of employment by 40% points – and our results suggest that qualifications drive most of the returns to education.

► We examine the effect on academic qualifications of two school leaving age rules.
► The 1973 RoSLA affected both qualification attainment and years of schooling.
► The “Easter Leaving Rule” affects only qualification attainment, not schooling length.
► Much of the RoSLA effect on employment comes through qualifications.
► Policy implications for raising the minimum school leaving age to 17.