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Schooling as a Wage Depressant

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  • Edward P. Lazear

Abstract

We investigate the relationship between current schooling and current wage rates. Casual observation seems to reflect a discontinuity in wage rate growth which occurs when an individual completes school and joins the labor force as a permanent member. This suggests that the time spent in work while attending school is in some sense secondary. Here, the marginal value of the individual's time is considerably lower than the average value of his time. The problem is essentially one of "anti-complementarities" between the production of human capital through formal schooling and working in the primary occupation. More generally, the productivity of an individual's time in one endeavor is not independent of how the rest of his time is spent. If this is the case, students will be willing to accept lower paying jobs which do not greatly diminish the productivity of school time in lieu of jobs offering higher wages at the cost of a greater reduction in school time productivity. The wages of students, other things constant, are about 12% lower than those of non-students. The magnitude of this wage differential is surprisingly large and warrants investigation on empirical grounds alone. This paper explores the empirical relationship and examines various explanations for it. Finally, implications of the analyses are discussed.

Suggested Citation

  • Edward P. Lazear, 1975. "Schooling as a Wage Depressant," NBER Working Papers 0092, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0092
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    1. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 74-103, Part II, .
    2. Giora Hanoch, 1967. "An Economic Analysis of Earnings and Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 2(3), pages 310-329.
    3. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    4. Lazear, Edward P, 1976. "Age, Experience, and Wage Growth," American Economic Review, American Economic Association, vol. 66(4), pages 548-558, September.
    5. Parsons, Donald O, 1974. "The Cost of School Time, Foregone Earnings, and Human Capital Formation," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 251-266, Part I, M.
    6. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    7. Elisabeth M. Landes, 1974. "Male-Female Differences in Wages and Employment: A Specific Human Capital Model," NBER Working Papers 0029, National Bureau of Economic Research, Inc.
    8. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 352-352.
    9. Johnson, Thomas, 1970. "Returns from Investment in Human Capital," American Economic Review, American Economic Association, vol. 60(4), pages 546-560, September.
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    1. Lazear, Edward P, 1977. "Education: Consumption or Production?," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 569-597, June.
    2. Mohitosh Kejriwal & Xiaoxiao Li & Evan Totty, 2020. "Multidimensional skills and the returns to schooling: Evidence from an interactive fixed‐effects approach and a linked survey‐administrative data set," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(5), pages 548-566, August.
    3. repec:eee:labchp:v:1:y:1986:i:c:p:357-386 is not listed on IDEAS
    4. Polachek, Solomon & Das, Tirthatanmoy & Thamma-Apiroam, Rewat, 2013. "Heterogeneity in the Production of Human Capital," IZA Discussion Papers 7335, Institute of Labor Economics (IZA).
    5. Mohitosh Kejriwal & Xiaoxiao Li & Evan Totty, 2019. "Multidemsional Skills and Returns to Schooling: Evidence from an Interactive Fixed Effects Aproach and a Linked Survey-Administrative Dataset," Purdue University Economics Working Papers 1316, Purdue University, Department of Economics.
    6. Alan L. Gustman & Thomas L. Steinmeier, 1979. "The Impact of the Market and the Family on Youth Employment and Labor Supply," NBER Working Papers 0415, National Bureau of Economic Research, Inc.

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