chapter  4
An economic analysis of cooperative education
Pages 7

If cooperative education is to have economic merit over orthodox university degree programme, then the present value of the wage premium for cooperative education over the working periods needs to be greater than the net cost of cooperative education that appeared in the third and fourth years over the academic programme. That is,

PV UCE > PV U or (Y UCE24 − Y U24 )/(1 + r) 5 + (Y UCE25 − Y U25 )/(1 + r) 6 + … + (Y UCEt − Y Ut )/(1 + r) T – 1 > (Y U23 + C)/(1 + r) 4 − (Y CE + C)/(1 + r) 3 (4-3)

It is easier to grasp what is going on by letting r = 0. Then, the inequality becomes,

(Y UCE24 − Y U24 ) + (Y UCE25 − Y U25 ) + … + (Y UCE59 − Y U59 ) > Y U23 − Y CE (4-4)

In another words, cooperative education is worthwhile if the sum of the stream of cooperative education wage premium, that is Y UCEt − Y Ut , exceeds the difference between the fi rst year earinings of a non-coop graduate, that is Y U23 , and that of coop student during work experience Y CE . Introducing non-zero discount rate would alter the condition but not greatly as r is not a large value, that is, typically a one digit fi gure in percentage terms. Certainly, what cooperative education needs to add up over an orthodox university education programme is far below what was needed for university education over high school certifi cate, as the direct and opportunity costs of cooperative education is much lower. In any case, cooperative education needs to make the graduate more productive than the orthodox university programme.