Toward an Improved Explanation of Income Attainment: Recalibrating Education and Occupation

Abstract

In past attempts at predicting income attainment, education and occupation have been recognized as the most intuitively appealing causal factors but have yielded especially dismal empirical results. This paper attempts to demonstrate that the relatively poor success at predicting income attainment with these variables can be corrected with straighforward recalibrations of their scales. A scale of occupations is drawn from classical notions of work hierarchies as well as from recent economic theory on the power of the employing firm. A scale of educational training targeted toward the new scale of occupations in offered as a logical corollary to the theory that stands behind the scale of occupations. The combined explanatory power of the new measures substantially increase the prediction of income attainment over past work in the area. Limitations of the measures and sample are discussed, and suggestions for future improvements are offered.