Where are we now in the economics of education?

This essay offers a bird's eye view of new directions in the economics of education. An increasing awareness of the socialization function of education, of the screening hypothesis, of the ‘incomplete’ employment contract and of labour market segmentation is leading, it is argued, to a picture of the economic value of schooling which is simply miles removed from the old-fashioned belief that education enhances cognitive knowledge and that employers pay educated people more because they know more. The new way of looking at the economic value of schooling is illustrated by the example of youth training and work experience programmes.