Labor Market Returns Research Articles

Grades and Employer Learning

This study examines the labor-market returns of skill signals. We identify the labor-market effect of grade point averages (GPA) by leveraging a nationwide change in the scaling of grades in Danish universities. Results show that a reform-induced increase in GPA that is unrelated to ability causes higher earnings immediately after graduation, but the effect fades in subsequent years. The effect at labor-market entry is largest for individuals with fewer alternative signals and the earnings adjustment occurs both within and across firms. Although employers initially screen candidates based on skill signals, our findings suggest that they rapidly learn about worker productivity.

The labor market returns of being an artist: evidence from the United States, 2006–2021

The labor market returns of being an artist: evidence from the United States, 2006–2021

Physical activity and labor market returns: Empirical evidence from China

This study aimed to explain the relationship between physical activity and labor market returns. A fixed effects model with IV was constructed based on panel micro-data from China to examine the contribution of physical activity to individual labor market returns. It is found that an additional hour of physical activity per day can increase an individual's monthly income by about 0.5%, and an additional time of physical activity per week can increase the individual's monthly income by about 0.2%. This study provided new empirical evidence to understand China's future economic growth and labor market developments.

Male investment in schooling with frictional labour and marriage markets

We present an equilibrium model with inter-linked frictional labour and marriage markets. Women’s flow value of being single is treated as given, and it captures returns from employment. Men can undertake a costly ex-ante investment in schooling. In the marriage market, women search sequentially for men characterised by wages, so they use a reservation value strategy. Single unemployed men conduct marital sequential search and, with an eye on the marriage market, also conduct a so-called constrained sequential job search. Given this setup, schooling enhances men’s marriage prospects as well as their labour market returns. In turn, women’s behaviour affects men’s schooling investment decision and their optimal job search strategy. We establish that for any given set of parameters, there exists a unique market equilibrium where a fraction of men get educated, and show that this fraction decreases if women’s labour market returns increase. We also examine the robustness of such an equilibrium.

Do women's empowerment and self-expression values change adolescents' gendered occupational expectations? Longitudinal evidence against the gender-equality paradox from 26 European countries.

Despite the increases in women's educational attainment in recent decades, female labor market participation and labor market returns are still lower than those of their male counterparts. Among the main factors explaining this persistence of economic inequality is the persistently gendered nature of occupational expectations, which results in gender segregation of labor. In this paper, we describe how gender-specific adolescents' occupational expectations change over time (2006-2018) and how women's empowerment and cultural norms might influence gender-specific occupational expectations. Against the backdrop of the research on the gender-equality paradox and from a comparative perspective, we focus on national and institutional characteristics to investigate how individual and national factors explain gendered occupational expectations. We answer our research questions by applying a two-step multilevel model with fixed effects. For this, we used PISA data and merged them with state-level information from 26 European countries. We add to existing research by making three contributions. First, we describe the changes in occupational expectations over time within European countries by looking at the gender composition of the desired occupation and distinguishing three categories (gender-typical, gender-balanced, and gender-atypical). Second, we investigate the relationship between national characteristics and the evolution of gendered occupational expectations separately by gender to reveal gender-specific mechanisms. Third, by using data from two-time points, we explore which national-level changes lead to changes in students' occupational expectations. Our first descriptive results show that the patterns of how students' occupational expectations change over time differ remarkably between countries. In 2018 in some countries, students' occupational expectations became more segregated while in others the number of students with gender-balanced or gender-atypical expectations increased. Our fixed effects models show that women's empowerment and self-expression value explained variance over time. For example, women's empowerment measured via an increase in women's employment and participation in parliament led to less gender-typical occupational expectations among girls and boys. Similarly, a rise in self-expression values led to less gender-typical occupational expectations, again for both boys and girls. Remarkably, our results do not verify the gender-equality paradox for occupational expectations, as is the case in previous cross-sectional analyses.

(Incorrect) Perceived Returns and Strategic Behavior among Talented Low-Income College Graduates

Job applicants use resumes to send signals to potential employers. Applicants are free to select the items that go in their resumes and are expected to include signals they perceive will help them achieve their goals and avoid those that they anticipate could hurt them. We show that 92 percent of beneficiaries of a highly selective scholarship for poor and talented students avoid listing this award when applying for jobs. This is consistent with beneficiaries perceiving a negative labor market return from sending that signal. A correspondence study shows instead that listing the scholarship increases callback rates by 20 percent.

Constrained ‘choices’: Optional familism and educational divides in work‐family arrangements

AbstractGerman family policy was dramatically reformed in the 2000s because of dual reforms to parental leave and childcare provision. While considerable evidence has suggested the reforms affected employment and other outcomes, this article asks what the consequences of these reforms are for the family, specifically for patterns of work‐family arrangements. Moreover, it asks how education matters for work‐family arrangements post‐reform. Using German Socio‐Economic Panel data, I show that college‐educated mothers giving birth to their first child after the reforms earned roughly half of household income if they benefited from expanded local childcare access. By contrast, in areas with lower childcare availability, even among the college‐educated, mothers' earnings resemble pre‐reform patterns, where mothers earn between a quarter to a third of household income. Therefore, the reforms contributed to greater differences in family structures based on the education. One interpretation of these findings is that the status reproducing nature of the Continental welfare states has recalibrated for the modern age, de‐gendered for those with the greatest labour market returns.

The Labor Market Returns of Being An Artist: Evidence from the United States, 2006-2021

The Labor Market Returns of Being An Artist: Evidence from the United States, 2006-2021

Career and Technical Education at Community Colleges: A Review of the Literature

I review the literature evaluating sub-baccalaureate career and technical education (CTE) at community colleges. The goal of this study is to review the evidence describing how earning these types of credentials affects students’ outcomes, as well as which program characteristics contribute to student success. The research suggests that, on average, there are significant labor-market returns to obtaining short, technical credentials, although the returns vary across locations and fields of study. Researchers examining career pathway programs, sectoral partnerships, and apprenticeships have found mixed effects of participating in these programs, although so far, the literature is largely limited to short-term outcomes. More research is needed that ties program characteristics to student outcomes to develop our understanding of how to increase the probability of success for students enrolling in postsecondary CTE. We also need more studies examining the long-term outcomes for students graduating from these programs.

Labor Market Returns to MBAs From Less‐Selective Universities: Evidence From a Field Experiment During COVID‐19

AbstractMaster's degree enrollment and debt have increased substantially in recent years, raising important questions about the labor market value of these credentials. Using a field experiment featuring 9,480 job applications submitted during the early months of the COVID‐19 pandemic, I examine employers’ responses to job candidates with a Master of Business Administration (MBA), which represents one‐quarter of all master's degrees in the United States. I focus on MBAs from three types of less‐selective institutions that collectively enroll the vast majority of master's students: for‐profit, online, and regional universities. Despite the substantial time and expense required for these degrees, job candidates with MBAs from all three types of institutions received positive responses from employers at the same rate as candidates who only had a bachelor's degree—even for positions that listed a preference for a master's degree. Additionally, applicants with names suggesting they were Black men received 30 percent fewer positive responses than otherwise equivalent applicants whose names suggested they were White men or women, providing further evidence of racial discrimination in hiring practices.

Economics of minority groups: Labour-market returns and transmission of indigenous languages in Mexico

This study demonstrates a series of links between minority language skills, their economic return, and transmission across generations among Indigenous Mexican groups. We begin by estimating the differential in employment likelihood and wages between monolinguals of the dominant language (Spanish), relative to bilinguals who also know a local minority language. This effect of bilingualism on labour-market outcomes is identified using census and labour survey microdata and a matching procedure that ties individuals closely by ethnicity and socioeconomic cline. This enables us to separate language from ethnicity and reduce the bias driven by unobservable factors, compared to existing research. We find that, for indigenous Mexicans, retaining the minority language along with Spanish improves employment prospects, overturning earlier results. Next, we investigate whether languages that are associated with larger labour-market benefits are also more likely to be passed on from parents to children, using intergenerational microdata. We find this to be the case, even after a rich set of controls on socio-economic environment. The results support a view that even in the absence of institutional support, minority languages may sustain themselves over generations in an ecological niche supported by labour-market specialisation.

Asset prices in a labor search model with confidence shocks

This paper studies a labor search model with agents who are averse to ambiguity (Knightian uncertainty). Shocks to confidence about future productivity are modeled as changes in ambiguity. Using the Survey of Professional Forecasters data, I find that confidence shocks help explain the equity premium and the stock market volatility, including their term structure. Ambiguity amplifies the response of the economy to productivity shocks, helping the model produce more realistic dynamics of unemployment, vacancies, labor market tightness, stock prices, and returns. Returns in the model are predictable with price-dividend ratios; both returns and dividends are predictable with unemployment, like in the data. Two extensions consider shocks to bargaining power and to separation rate and find similar implications of ambiguity about these shocks.

Who benefits from school-to-work linkages in the labour market? A comparison between natives, migrants educated abroad, and those educated domestically

Abstract Recent research suggests that people with more occupation-specific qualifications (i.e. qualifications that link to a smaller set of occupations) experience greater benefits in the labour market. Based on human capital, signalling and credentialing theory, we argue that these benefits may vary between the native majority population, individuals with a migration background who hold a foreign qualification, and individuals with a migration background with a domestic qualification. Using data from the German Microcensus, we find that for both the native majority and immigrants with a domestic qualification, holding a more occupation-specific qualification relates to a higher chance of working in a position the individual is educated for in terms of both level and field. Holding a more occupation-specific qualification also relates to higher labour market returns (i.e. income and occupational status) for those who work in a job for which they are educated, yet is mostly negatively related to the labour market returns for those who do not work in a job for which they are educated. Migrants with a foreign qualification profit less from holding occupation-specific qualifications and suffer more from their associated disadvantages.

Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence

Abstract A large literature in cognitive science studies the puzzling “Flynn effect” of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort’s mix of skills is determined by different skills’ relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 37% of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.

Maternal employment effects of paid parental leave

We study the short-, medium-, and long-run employment effects of a substantial change in Germany’s parental leave benefit program. In 2007, a means-tested parental leave transfer program that paid benefits for up to 2 years was replaced with an earnings-related transfer that paid benefits for up to 1 year. The reform changed the regulation for prior benefit recipients and added benefits for those who were not eligible before. Although long-run labor force participation did not change substantially—the reform sped up mothers’ labor market return after their benefits expired. Likely pathways for this substantial reform effect are changes in social norms and in mothers’ preferences for economic independence.

Labor Market Returns to Vocational Secondary Education

Abstract We study labor-market returns to vocational versus general secondary education using a regression discontinuity design created by the centralized admissions process in Finland. Admission to the vocational track increases annual income by 7 percent at age 31, and the benefits show no signs of diminishing with time. Moreover, admission to the vocational track does not increase the likelihood of working in jobs at risk of replacement by automation or offshoring. Consistent with the notion of comparative advantage, we observe significantly larger returns for people who express a preference for vocational education in their applications to secondary school.

“The contribution of MOOCs to upskilling the labor force”

PurposeThe study aims to investigate whether participation to massive open online courses (MOOCs) may lead to labor market returns and through which mechanisms such relative advantage may take place. Indeed, despite high figures of registered users, empirical studies on occupational returns are limited and MOOCs may represent a viable, cost-efficient example of lifelong learning practice to respond to the demand of a better skilled workforce for the fourth industrial revolution.Design/methodology/approachThe study is based on qualitative empirical material constituted by a set of 21 qualitative semi-structured interviews conducted in 2019 among learners who registered in MOOCs provided by European higher education institutions.FindingsInterviews return a situation in which MOOCs are beneficial for work: learners appreciate the new knowledge and skills they can access, with time flexibility and low entry cost. However, MOOCs positive contribution is not at everyone’s reach: self-selection issues tend to further advantage individuals with high levels of education and individual resources. Moreover, MOOCs can increase the risk of a shift of responsibility for training to the employees and qualify as a lower tier type of qualification, reinforcing social closure mechanisms based on educational credentials.Originality/valueThe study contributes to the empirical analysis of MOOCs economic returns empirically, by providing original qualitative material. Second, it contributes theoretically by bridging literature on economic and occupational returns to education on one side and literature on digital technologies in education on the other, providing new insights on the potentials and limits of MOOCs as a new form of lifelong learning.

Social origins, track choices and labour-market outcomes: evidence from the French case

This paper examines the labour-market returns to different high school tracks in the French context. We use rich nationally representative longitudinal data running from the beginning of secondary education until entrance into the labour market: the Panel d’élèves du second degré, recrutement 1995 combined with the Entrée dans la vie adulte-EVA follow-up survey. Analysing these data, we are able to identify the consequences of track placement in high school on various labour-market outcomes controlling for social and academic selection into tracking. Our results show that academic diplomas offer higher labour-market benefits than vocational diplomas, even when adjusting for selection into tracks based on prior school performance, family background and other socio-demographic characteristics. The advantage of the academic track stays large, both for the whole group of upper secondary graduates and for those who have not achieved a tertiary degree. Our results further indicate that academic qualifications are even more rewarding for service-class graduates. We discuss the theoretical and policy implications of our results for processes of intergenerational reproduction.

(Em)Powered by Science? Estimating the Relative Labor Market Returns to Majoring in Science in High School in India

Despite widespread belief that majoring in science in high school has a greater payoff in the Indian labor market than majoring in business/humanities, there is no hard evidence to substantiate this thought. Here I provide the first evidence of the causal effect of majoring in science on individuals’ labor market outcomes relative to majoring in business/humanities using microdata from India. Estimating the causal effect, however, is a formidable task since selection into high school major is nonrandom and exclusion restrictions are unavailable. I circumvent these difficulties by employing an econometric technique that does not rely on valid exclusion restriction for identification. I find that majoring in science has a negative causal effect on individuals’ employment probability. Conditional on being employed, however, majoring in science has a positive causal effect on individuals’ earnings and probability of being engaged in a professional occupation. These findings suggest, in contrast to conventional wisdom, the labor market effects of majoring in science in high school in India is not a plain tale of ‘science premium’ - while majoring in science might lead to relatively better labor market outcomes for those who are able to find employment, finding employment itself is more difficult for science majors.

Who benefits from attending elite universities? Family background and graduates’ career trajectories

The literature on social stratification has paid considerable attention to whether and to what extent attending prestigious universities is beneficial for graduates’ labor market returns. This paper contributes to the literature by applying a more dynamic perspective in asking whether graduates from prestigious and less prestigious universities differ in their career progression across fourteen years since labor market entry. It further investigates whether graduating from prestigious universities pays off more or less for graduates from different educational backgrounds. While the positive selection hypothesis suggests that students most likely to attend prestigious universities will benefit the most, the negative selection hypothesis suggests the opposite. Using multilevel growth curve modeling and the 1970 British Cohort Study (N = 939), the findings show no discernible differences in occupational prestige between graduates from diverse universities. If at all, there is a small Russell Group premium restricted to the early working career. This early Russell Group premium is mainly found among first-generation graduates providing evidence for the negative selection hypothesis.