Assessing the Demand Suitability of Investment in Education in Pakistan: A Comparison of Returns to Different Levels of Education

In the context of rising graduate-level unemployment and severe economic constraints facing the education sector in Pakistan, this paper evaluates the suitability of educational investment demand by comparing the rates of return across different levels of education, including primary, secondary, higher secondary, undergraduate, and tertiary education. The latest data from the Labor Force Survey (LFS) 2020-21 is used to estimate a dummy variable regression equation for various education categories. The rates of return for different education levels are further segregated by gender and provincial status. The estimates indicate that the return rates for lower levels of education below the secondary level are low, while the highest rate, 23 percent, is observed at the undergraduate level; however, the rate of return decreases at the tertiary or postgraduate level. The results, categorized by province and gender, show a higher rate of return for females at higher education levels. Furthermore, province-wise results reveal that educational attainment from Baluchistan benefits from higher returns. Overall, education adds an average of 10 percent to earnings. It is suggested that more funds should be allocated to undergraduate education, and investment in education should be prioritized for women and individuals in underdeveloped provinces.