The Legitimation of Rewards to Education

Abstract

Everywhere, education is well rewarded, roughly 5% to 15% for each additional year of university, hence a major source of income inequality. Why do ordinary people see income rewards to education as legitimate? Two key theories: (1) their moral views might align with classical equity arguments asserting a moral entitlement to rewards in proportion to contributions. (2) Alternatively, they might see rewards to education as fair returns on investment, a morally infused folk version of human capital. These share almost all their predictions, but they differ if an employer fully finances the education. Analysis of a large representative Australian sample reveals that the public’s ideal returns to education match equity justifications (~80%), not economists’ fair return on investments (~10%).