A simulation of COVID-19 impact on learning loss considering three, five and seven months of school closures was recently published using data on 157 countries at the primary and secondary level.<sup>32</sup> The authors found COVID-19 could result in a loss of between 0.3 and 0.9 years of schooling adjusted for quality, bringing down the effective years of basic schooling that students achieve during their lifetime from 7.9 years to between 7.0 and 7.6 years. Their findings suggest that students from the current cohort could, on average, face a reduction of up to $1,400 in annual earnings. In present value terms, this amounts to up to $25,000 in lost earnings over the typical working lifetime. Globally, a school shutdown of 5 months could generate learning losses that have a present value of $10 trillion. Similarly, another global study found that if learning in grade three is reduced by one-third, roughly the amount of time many children are likely to be out of school, learning levels in grade 10 would be a full year lower than would have been the case in the absence of COVID-19.<sup>33</sup> We build on these studies by adding higher education students into the calculation. The 224 million young people globally who are studying at the tertiary education level account for around 15 percent of the world’s learners. Meanwhile, just-in-time analysis from the United States using Bureau of Labor Statistics employment and wage shows how quickly COVID-19 had an impact on wages by mid-April 2020. The weekly wages of workers at the bottom quintile decreased by 6 percent on average between mid-February and mid-March and by 26 percent between mid-March and mid-April.<sup>34</sup> In Canada, data from the Labor Force Survey show that COVID-19 induced a 32 percent decline in aggregate weekly work hours among workers aged 20-64, alongside a 15 percent decline in employment.<sup>35</sup> In the United Kingdom, the collapse has been twenty times faster and much deeper than the Great Recession. More than a quarter of workers have lost at least half of their income due to the COVID-19 crisis.<sup>36</sup> Low income workers in developing countries may face a higher risk of income loss during the COVID-19 lockdown as it is less feasible to conduct their jobs from home.<sup>37</sup> Predicted earnings losses due to COVID-19 in India appear substantial.<sup>38</sup> According to a recent survey in the U.S., students have internalized these losses, as they expect less education, fewer job opportunities and lower earnings in the future.<sup>39</sup>

# **Theoretical framework**

We use human capital theory.<sup>40</sup> Time and money spent on education builds human capital, hence one should be able to estimate the rate of return on such investment in a way similar to investment in physical capital. The costs incurred by the individual are the foregone earnings while studying, plus the resource costs of schooling. Since in a majority of countries, basic education is available to children tuition-free, in practice the only economic cost to individuals is the foregone earnings. The private benefits amount to what a more educated individual earns above a control group of individuals with less education. "More" and "less" in this case usually refers to adjacent levels of education, for example, university graduates versus secondary school graduates (see Figure 1).

The private rate of return to an investment in a given level of education in such a case can be estimated by finding the rate of discount (r) that equalizes the stream of discounted benefits to the stream of costs at a given point in time. The Mincerian<sup>41</sup> earnings function allows us to estimate an overall rate of return to one extra year of schooling. This has been applied widely in practically all countries in the world.<sup>42</sup> This method involves the fitting of a function of log-wages, using years of schooling, years of labor market experience and its square as independent variables. In 5