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The Changing Wage Return to an Undergraduate Education

Author

Listed:
  • O'Leary, Nigel C.

    (Swansea University)

  • Sloane, Peter J.

    (Swansea University)

Abstract

Between 1990/91 and 2000/01 the number of male undergraduates in Britain increased by over one-third while the number of female undergraduates has increased nearly twofold. Given this substantial increase in supply we would expect some impact on the wage premium for recent graduates unless demand has shifted in parallel. Following Katz and Murphy (1992), we adopt a simple supply and demand framework to analyse changes in earnings mark-ups across degree disciplines over time. Using a propensity score approach to match those graduates entering the labor market with an age balanced sample of individuals with two or more A-Levels from the Labour Force Survey, we find a significant decline in the mark-up for females, whilst no such change is apparent for males. These aggregate figures, however, mask a great deal of variation across degree subjects, with declines in those subjects in which women predominate and in the lowest quartile of the earnings distribution being identified. The results point to both supply and demand factors impacting on the graduate mark-up as theory would suggest.

Suggested Citation

  • O'Leary, Nigel C. & Sloane, Peter J., 2005. "The Changing Wage Return to an Undergraduate Education," IZA Discussion Papers 1549, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1549
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    References listed on IDEAS

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    1. Steven Mcintosh, 2006. "Further Analysis of the Returns to Academic and Vocational Qualifications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(2), pages 225-251, April.
    2. O'Leary, Nigel C. & Sloane, Peter J., 2005. "The Return to a University Education in Great Britain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 193, pages 75-89, July.
    3. Naylor, Robin & Smith, Jeremy & McKnight, Abigail, 2002. "Why Is There a Graduate Earnings Premium for Students from Independent Schools?," Bulletin of Economic Research, Wiley Blackwell, vol. 54(4), pages 315-339, October.
    4. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages 499-517, November.
    5. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
    6. Dearden, Lorraine, et al, 2002. "The Returns to Academic and Vocational Qualifications in Britain," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 249-274, July.
    7. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    8. Colm Harmon & Ian Walker, 2000. "The Returns to the Quantity and Quality of Education: Evidence for Men in England and Wales," Economica, London School of Economics and Political Science, vol. 67(265), pages 19-35, February.
    9. Colm Harmon & Ian Walker & Niels Westergaard-Nielsen (ed.), 2001. "Education and Earnings in Europe," Books, Edward Elgar Publishing, number 2237.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is the graduate premium falling?
      by chris dillow in Stumbling and Mumbling on 2009-01-28 20:23:06

    Citations

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    Cited by:

    1. Joanne Lindley & Stephen Machin, 2012. "The Quest for More and More Education: Implications for Social Mobility," Fiscal Studies, Institute for Fiscal Studies, vol. 33(2), pages 265-286, June.
    2. Lindley, Joanne & McIntosh, Steven, 2015. "Growth in within graduate wage inequality: The role of subjects, cognitive skill dispersion and occupational concentration," Labour Economics, Elsevier, vol. 37(C), pages 101-111.
    3. Massimiliano Bratti & Robin Naylor & Jeremy Smith, 2005. "Variations in the Wage Returns to a First Degree: Evidence from the British Cohort Study 1970," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1005, Universitá degli Studi di Milano.
    4. Ian Walker & Yu Zhu, 2008. "The College Wage Premium and the Expansion of Higher Education in the UK," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 695-709, December.
    5. Longhi, Simonetta & Brynin, Malcolm, 2007. "Job competition amongst university graduates," ISER Working Paper Series 2007-18, Institute for Social and Economic Research.
    6. Walker, Ian & Zhu, Yu, 2005. "The College Wage Premium, Overeducation, and the Expansion of Higher Education in the UK," IZA Discussion Papers 1627, Institute of Labor Economics (IZA).
    7. Seamus McGuinness & Jessica Bennett, 2009. "Changes in the returns to schooling 1991-2002: evidence from the British Household Panel Survey," Education Economics, Taylor & Francis Journals, vol. 17(2), pages 167-184.
    8. Kristinn Hermannsson & Katerina Lisenkova & Patrizio Lecca & Peter McGregor & Kim Swales, 2010. "The Importance of Graduates for the Scottish Economy: A "Micro-to-Macro" Approach," Working Papers 1026, University of Strathclyde Business School, Department of Economics.
    9. Kristinn Hermannsson & Katerina Lisenkova & Patrizio Lecca & J Kim Swales & Peter G McGregor, 2014. "The Regional Economic Impact of More Graduates in the Labour Market: A ‘Micro-to-Macro’ Analysis for Scotland," Environment and Planning A, , vol. 46(2), pages 471-487, February.
    10. Séamus McGuinness, 2006. "Overeducation in the Labour Market," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 387-418, July.
    11. Ian Walker & Yu Zhu, 2007. "The College Wage Premium, Overeducation, and the Expansion of Higher Education in the UK by and," Working Papers 200720, Geary Institute, University College Dublin.

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    More about this item

    Keywords

    education; wages;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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