Earning Profiles for Italian Male Workers: Is There Evidence of a Premium for Education?

Abstract

Are younger generations better off than older ones? Can younger cohorts starting with lower real wages catch up with previous generations? Are young or old generations becoming more unequal? In this study we concentrate on the study of inter-generational and intra-generational patterns of earnings for Italian male dependent workers for the period 1987-2006. Using data from the Bank of Italy's Survey of Household Income and Wealth, we construct cohort-education-(macro) region-specific age profiles for mean real wages (the measure of central location here adopted) and for the 90-10 percentile differential (the inequality measure), allowing for region-specific price indexes. We verify how different cohorts have been doing comparatively and finally we test whether, with time, the (mean) returns to experience and education have increased. Our results indicate that, for the two education groups considered, each successive generation has benefited from higher entry wages, but we also find that the wage age-profiles for both education groups have become flatter so that we cannot conclude that more recent cohorts are better off than their immediate predecessors. When looking at high/low education relative wages, we find only scant evidence of positive cohort profiles (i.e. that the education premium has been rising across cohorts), while we notice that the relative wage tends to increase over the life-cycle. Finally, we find that inequality tends to increase with age, while we also find evidence of across-cohort variation, in the direction of increasing inequality. Our provides a clear framework in which “between” and “within” cohort comparisons are meaningful and easily interpretable. Moreover, it allows us to relate our results to those obtained by MaCurdy and Mroz (1995) and Beaudry and Green (2000) in their studies of the earning patterns of, respectively, American and Canadian workers.