Improving America's Schools The Role of Incentives (1996) / Chapter Skim
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4 Changes in the Structure of Wages
4 Changes in the Structure of Wages
Pages 53-74
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From page 53... ...
For example, in 1992 the probability that a randomly chosen high school graduate earned more than a randomly chosen college-educated worker was over 20 percent. Nevertheless, it is clear that the labor market rewards associated with greater schooling are substantial.
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From page 54... ...
Hypotheses about shifts in demand are especially attractive since relative prices and quantities have sometimes moved in the same direction. One possibility is that shifts in product demand -- for example, as a result of changing international trade flows -- cause some sectors to shrink or grow and result in labor demand shifts in favor of the types of workers employed in the growing sectors.
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From page 55... ...
The series track each other, with more dramatic changes in returns to college for younger workers. Among these younger workers, the wage premium earned by college graduates was about 35 percent in the early years of the data.
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From page 56... ...
Here we plot, for the two different experience groups, the college graduates' average centile location in the earnings distribution for high school graduates. This is the probability that a randomly chosen high school graduate has lower wages than a randomly chosen college graduate.
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From page 57... ...
is the probability that a randomly chosen high school graduate will have lower earnings than this particular college graduate. Averaging this number over all college graduates yields the probability that a randomly chosen college graduate will have higher earnings than a randomly chosen high school graduate, or more simply the average centile location of college graduates in the distribution of high school graduates' earnings.
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From page 58... ...
In all cases the returns to college graduates rose from the 1973–1979 period to the 1980–1986 period, and in all cases returns rise from 1980–1986 to 1987–1992. The data in Table 4.2 suggest
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From page 59... ...
As before, wage premiums are given in percentages. These statistics would be fairly sensitive to any changes over time in the underlying raw abilities of the people composing each schooling group, perhaps especially at the lower end of the schooling distribution, and so should be interpreted with care.
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From page 60... ...
For example, annual hours worked by college graduates fell by about 25 hours (a little more than 1 percent) , as opposed to about 100 hours (about 4 percent)
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From page 61... ...
Since the numbers of hours and weeks TABLE 4.5 Distribution of Workers and Weeks Worked over Schooling Levels, All Experience Levels
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From page 62... ...
It is reasonable to interpret much of the observed changes in relative quantities as a supply response to these changing demand conditions. INDUSTRY-BASED COMPOSITION EFFECTS The fact that the relative price of college-educated labor increased during a period when its relative quantity rose implies growth in the demand for college graduates that has outpaced any growth in supply.
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From page 63... ...
For aggregation across education levels, those with less than a high school diploma are assigned a weight of 0.82 for aggregation with high school graduates, and
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From page 64... ...
The employment effects listed in column one for particular industries are positive for those with 13 to 15 years of schooling are assigned a weight of 0.696 for aggregation with high school graduates and a weight of 0.296 for aggregation with college graduates. Employment shares are calculated as a percentage of the aggregate fixed-wage weighted labor hours employed in the industry.
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From page 65... ...
Expansions in professional/finance and education/welfare, industries that typically have more educated workers, account for another 2.11-percentage-point increase in the between-industry component. Although these industry composition changes help explain the increased relative demand for college graduates, they by no means explain the majority of the total effect.
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From page 66... ...
For instance, do college graduates increasingly go into higher-paying occupations while high school graduates increasingly go into lower-paying ones? Or perhaps there are common themes describing the types of occupations that are growing or shrinking.
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From page 67... ...
Compare this to the experience of young college graduates. Wages for this group fell enough in the 1970s that the college/high school wage premium fell during this period (recall Figure 4.1)
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From page 68... ...
68 Improving America's Schools: The Role of Incentives TABLE 4.8 Between- and Within-Occupation Wage Effects, by Schooling Level
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From page 69... ...
The contrast across the college and high school groups in the importance of occupational shifts is interesting; clearly, a portion of the increasing college/high school wage premium between 1970 and 1990 was due to the fact that there was an occupational downgrading among high school graduates. The panel for all experience levels reveals similar patterns -- a convergence in the wages of college and high school graduates during the 1970s along with a divergence in the 1980s and a steady erosion in the types of occupations that high school graduates occupy.
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From page 70... ...
greatest absolute increase in employment of college graduates, and workers in that occupation earned wages that were 18.8 percent higher than those of the average worker. The occupation that experienced the greatest decrease in college-educated employment was "dentists," which was associated with an 84.6 percent wage premium during the period examined.
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From page 71... ...
In panel B the workers losing the most labor with 13 to 15 years of schooling are white-collar, high-wage-premium occupations. Large negative wage premiums are especially apparent in the occupations with large employment gains in panels C and D
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From page 72... ...
Although it is difficult to make generalizations based on only a few occupations, the growth in employment for high school graduates in such occupations as "janitors" and "groundskeepers" in the 1980s and the clear movement of those with some college education out of some white-collar and financial services occupations are striking. There are several possible explanations for the declining occupational placements of workers those with less than 16 years of schooling.
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From page 73... ...
It is clear that today, for one reason or another, young people without a college education are entering the labor force at an ever-increasing disadvantage. SUMMARY Education has become a more important determinant of labor market outcomes in the recent past.
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