To what extent does higher education enhance women’s wage: A Comparative Study on Human Capital and Wage of Women in South Korea and Germany

고등교육이 여성의 임금에 미친 영향 : 한독 인적자본과 여성임금 비교연구

This study investigates the effect that higher education has on wages for women with and without children in South Korea and Germany. In the human capital theory of women, child care is considered a determinant that reduces women’s productivity and wages. This brings about a discontinuity in women’s working experience and depreciates their skills (Mincer and Polachek, 1974). This empirical fact is described as the earnings penalty of women. On the other hand, higher education is regarded as a determinant that enhances women’s participation in the labor market and increases the level of wages (Mincer, 1974). To what extent does higher education enhance the wages of women whose employment is affected by child care?The hypothesis advanced is that women’s wages would be higher in Germany, where demand for higher education is higher, and in South Korea, where demand for higher education is lower, wage levels will be lower, according to the neoclassical theory of demand and supply in the labor market. Using 2004–2007 data for women aged between 26 and 55 taken from KLIPS and GSOEP, random effects estimation found the following:The wage differences related to graduation from university generally appear to be greater in South Korea than in Germany, when compared to the base variable; that is, senior high school graduation in South Korea and a vocational qualification and/or qualification for college or university entrance in Germany. In South Korea, the wage gap between a person who has graduated from university and one who has graduated from senior high school is approximately 6 percent points greater for mothers (46 percent) compared to non-mother (40 percent). This gap is far greater in Germany than in South Korea. The gap between university graduation and vocational qualification and/or qualification for college or university entrance is 31 percent points greater for mothers (49 percent) than non-mothers (18 percent). In Korea, educated women have higher wages due to their education. In Germany, educated women have lower average wages due to their education which contradicts the hypothesis of this study. For this low educational wage differential in Germany, educated women without children seem to endure low wages in exchange for the higher demand for higher education in the labor market. Mothers’ wages are (strongly) enhanced by their higher education in both countries. The reason for higher wage would be higher reservation wage for educated mothers. The novelty of this study is the finding that educational wage differs between mothers and non-mothers in South Korea and Germany.