Wage Returns Research Articles

Does Education and Experience Matter in the Distribution of Wages in Nepal? A Quantile Regression Approach

Labor market returns depend on the level of education as well as experience of the labors. Though education is argued to be the key determinant of wage rate, other factors such as the sector of employment, gender of the employee, marital status and work industry also matter. This paper investigates the returns from years of schooling and experience by examining the wage structure in formal, informal and agriculture sectors of Nepal. The Mincerion wage equation and quantile regression technique has been used to analyze such impact by utilizing the recent labor force survey data of Nepal. Our results show that wage returns are positively associated with schooling in all the three sectors. However, return to experience has negative association in case of agriculture sector. Furthermore, return to schooling has higher impact at higher quantile along with the distribution of wages in formal sector and informal sector. The maximum effect of education is 4 percent at 0.90 quantile in formal sector. An additional year of experience has high impact at lower-wage group in case of informal and formal sector. The effect varies from 9.2 percent at 0.1 quantile and 4.9 percent at 0.9 quantile in formal sector. The experience effect is higher at median (4.06 percent) in case of informal sector.

Non-Cognitive Skills: How Much Do They Matter for Earnings in Canada?

Evidence from different countries suggests that non-cognitive skills play an important role in wage determination and overall social outcomes, but studies for Canada are scarce. We contribute to filling this gap by estimating wage regressions with the Big Five traits using the Longitudinal and International Study of Adults. Our results indicate that conscientiousness is positively associated with wages, while agreeableness, extraversion, and neuroticism are associated with negative returns, with higher magnitudes on agreeableness and conscientiousness for females. Cognitive ability has the highest estimated wage return so, while significant, non-cognitive skills do not seem to be the most important wage determinant.

The role of local labour market conditions and pupil attainment on post-compulsory schooling decisions

Purpose The purpose of this paper is to assess the role of local labour market conditions and pupil educational attainment as primary determinants of the post-compulsory schooling decision. Design/methodology/approach Through the specification of a nested logit model, the restrictive independence of irrelevant alternatives (IIA) assumption inherent in the multinomial logit (MNL) model is relaxed across multiple unordered outcomes. Findings The analysis shows that the factors influencing schooling decisions differ for males and females. For females, on average, the key drivers of the schooling decision are expected wage returns based on youth educational attainment, attitudes to school and parental aspirations, rather than local labour market conditions. For males, higher local unemployment rates encourage greater investment in education. Originality/value The contribution of this paper to the existing literature is threefold. First, a nested logit model is proposed as an alternative to a MNL. The former can formally incorporate the structured and sequential decision-making process that youths may engage with in relation to the post-compulsory schooling decision, as well as relaxing the restrictive IIA assumption inherent in the MNL across multiple unordered outcomes, an issue the authors discuss in more detail in the Methodology section below. Second, the analysis is based on extremely rich socio-economic data from the Longitudinal Study of Young People in England, matched to local labour market data and administrative data from the National Pupil Database and Pupil Level Annual School Census, which provide a broad set of unusually high-quality measures of prior attainment. The authors argue that such high-quality data and an appropriate model specification allows identification of the determinants of the post-compulsory decision in a more detailed manner than many previous analyses. Third, the data have the scale necessary to consider whether the determinants of post-compulsory schooling decisions vary by gender, a particularly important issue given the differential education participation rates of males and females (e.g. in this cohort, females are about 10 percentage points more likely to go on to higher education in the UK than males), and the gendered choices of occupation (see, e.g. Bertrand, 2011). The work will, therefore, provide recent empirical evidence from England on gender differences in the determinants of education choices.

Wage Returns to English Proficiency in Poland

We investigate the effect of English language proficiency on the wages of native full-time employees in Poland. Using a unique data set with information on over 600,000 survey respondents polled over the five-year period from 2013 to 2017, we employ an IV approach founded on a natural experiment - namely, the reform of foreign language instruction in Polish schools. Our preferred estimates indicate that monthly wages for those individuals with ‘good’ or ‘very good’ knowledge of English exceeded the wages of those with ‘no English’ (or those with just a conversational proficiency) by nearly 60% for men and more than 50% for women. The estimates are statistically significant for both genders, and suggest quantitatively relevant wage returns for proficiency in English.

Careers within Firms: Occupational Mobility Over the Lifecycle

AbstractWith falling labor market dynamism in the United States, opportunities within firms take on increasing importance in young workers’ career progression. Developing a variety of occupational ranking metrics, I show that occupational mobility within firms follows a standard lifecycle pattern in which the frequency, distance, and wage return from mobility fall with age. However, when upward and downward mobility are considered separately, the distance of moves increases over the lifecycle. Thus, while young workers make the smallest distance occupational moves up and down, they have the largest wage gains and losses associated with these moves. I find that wage growth for young workers deteriorated substantially in the first decade of the 2000s, primarily driven by a reduction in wage growth within firms, whereas mid‐career workers have experienced no such change. I argue this is most likely driven by the dramatic fall in employer‐to‐employer mobility for young workers since the early 2000s. Encouragingly, wage growth has improved markedly for young workers since 2012.

Dynamics of English Fluency Return for Refugees and Other Immigrants in the United States

Previous work has established that U.S. immigrants earn more if they are fluent in English, but a portion of that return likely reflects biases because fluency is correlated with unobserved factors such as self-selection and ability to job shop. This article investigates those factors by looking at the variation in the crude fluency returns earned by resettled refugees and other immigrants in the United States. Results show that nonrefugees initially earn a much larger wage return for fluency, and this gap persists in the first years after immigration. However, refugees’ return does eventually increase and catches up with that of the nonrefugees.

A Note on the Wage Effects of the 1972 Raising of the School Leaving Age in Scotland and Northern Ireland

AbstractIn this note, we use the UK Labour Force Survey to estimate the wage return to an additional year of schooling for Scotland and Northern Ireland exploiting the 1972 Raising of the School Leaving Age (RoSLA). Prior literature on this topic has consistently ignored both countries in a UK context, likely due to an incorrect belief that they were not affected by the 1972 RoSLA until some years later. We demonstrate that both countries were affected by the education reform in 1972 and our estimates suggest a positive effect on hourly wages for Scotland.

Changes Across Cohorts in Wage Returns to Schooling and Early Work Experiences

This paper investigates the wage returns to schooling and actual early work experiences, and how these returns have changed over the past twenty years. Using the NLSY surveys, we develop and estimate a dynamic model of the joint schooling and work decisions that young men make in early adulthood, and quantify how they affect wages using a generalized Mincerian specification. Our results highlight the need to account for dynamic selection and changes in composition when analyzing changes in wage returns. In particular, we find that ignoring the selectivity of accumulated work experiences results in overstatement of the returns to education.

Changes Across Cohorts in Wage Returns to Schooling and Early Work Experiences

This paper investigates the wage returns to schooling and actual early work experiences, and how these returns have changed over the past twenty years. Using the NLSY surveys, we develop and estimate a dynamic model of the joint schooling and work decisions that young men make in early adulthood, and quantify how they affect wages using a generalized Mincerian specification. Our results highlight the need to account for dynamic selection and changes in composition when analyzing changes in wage returns. In particular, we find that ignoring the selectivity of accumulated work experiences results in overstatement of the returns to education.

Gender-specific human capital: identification and quantifying its wage effects

PurposeThe purpose of this paper is to better understand the possible reasons behind gender pay disparities, focussing on the unique features of male and female human capital and their wage returns. Despite increasing convergence of male and female human capital attainments, substantial differences remain. Extraction of human capital components non-overlapping across genders provides more profound explanation of the unexplained wage gap of men and women.Design/methodology/approachStarting with the non-parametric matching-based decomposition technique, the authors extend the pay gap estimation framework and focus on males and females having no counterpart in a set of characteristics within the opposite gender. The authors identify gender-unique human capital in terms of differences in distribution of individual characteristics across men and women and gender-specific combination of human capital characteristics. Wage returns to gender-specific profiles are evaluated applying wage regression on both full distribution of earnings and wage quantiles. The research relies on the Survey of Adult Skills (PIAAC) database for Estonia, which incorporates both formal education and cognitive skill records.FindingsThe study identifies sets of characteristics and competencies exclusive for both genders, proving that male and female profiles cannot be directly compared. The results suggest that men possess high individual and combined abilities in numeracy and problem solving in technology-rich environment, not always reached by females. This potentiates men’s higher earnings in spite of their generally lower formal educational attainments. Wage gap analysis over the full distribution of earnings shows even larger “glass ceiling” effect for females, possessing woman-specific human capital.Originality/valueThe authors raise a research from a novel perspective towards a role of human capital in gender wage inequality. Instead of usual reference to observable gaps in male and female characteristics, the authors identify the gender-specific human capital profiles, to a large extent non-reached by the opposite gender. Analysed associations between gender-specific characteristics and earnings provide an insight to possible effects of gender-unique human capital on a male-female wage disparity.

Erratum to: Who Benefits Most from a University Degree?: A Cross-National Comparison of Selection and Wage Returns in the US, UK, and Germany

Recent research on economic returns to higher education in the United States suggests that those with the highest wage returns to a college degree are least likely to obtain one. We extend the study of heterogeneous returns to tertiary education across multiple institutional contexts, investigating how the relationship between wage returns and the propensity to complete a degree varies by the level of expansion, differentiation, and cost of higher education. Drawing on panel data and matching techniques, we compare findings from the US with selection into degree completion in Germany and the UK. Contrary to previous studies, we find little evidence for population level heterogeneity in economic returns to higher education.

Entry into working life: Internal migration and the job match quality of higher‐educated graduates

AbstractWe estimate the impact of internal migration on job‐match quality for recent Dutch university and college graduates. We find positive yet modest wage returns. After controlling for the self‐selection of migrants with an IV approach, this effect is no longer significant for university graduates and all graduates from peripheral areas. We also find that, for our alternative job‐match measures, where there is evidence of migrant self‐selection, controlling for self‐selection strongly reduces the effect of internal migration on job‐match quality. In some cases, the returns on internal migration are found to be negative, which may signal forced migration.

Retornos salariales para Colombia, un análisis cuantílico

Este artículo analiza los retornos salariales de los jóvenes y adultos, comparando la influencia de la educación y la experiencia. Se examina principalmente la teoría del capital humano y las críticas a esta, a través del estudio de la relación entre educación, experiencia y salarios. El análisis empírico se base en el modelo de Mincer, pero mediante las regresiones cuantílicas, para determinar, por 10 cuantiles en cada grupo, cómo se dan los retornos salariales. Se comprueba que para los jóvenes hay mayor impacto de adquirir experiencia que la educación sobre los retornos salariales, lo que afecta la inserción laboral y el obtener mayores ingresos laborales.

The effect of prior healthcare employment on the wages of registered nurses.

BackgroundThe proportion of registered nurses (RNs) with employment in health-related positions before their initial RN education has increased in the past two decades. Previous research found that prior health-related employment is positively associated with RN workforce supply, potentially due to the wage differences based on different career paths. This study’s objective is to test the hypotheses that prior health-related employment is associated with differences in starting wages and with different rates of wage growth for experience as an RN.MethodsWe conducted a cross-sectional analysis using the 2008 National Sample Survey of Registered Nurses (NSSRN) linked with county-level variables from the Area Health Resource File. We estimated a Heckman model where the second-stage equation’s outcome variable was the logarithm of the RN hourly wage, accounting for the self-selection of working or not working as an RN (i.e., the first-stage equation’s outcome variable). Key covariates included interaction terms between years of experience, experience squared, and six categories of prior health-related employment (manager, LPN/LVN, allied health, nursing aide, clerk, and all other healthcare positions). Additional covariates included demographics, weekly working hours, marital status, highest nursing degree, and county-level variables (e.g., unemployment rate). We estimated the marginal effect of experience on wage for each type of prior health-related employment, conducting separate analyses for RNs whose initial education was a Bachelor of Science in Nursing (BSN) (unweighted N = 10,345/weighted N = 945,429), RNs whose initial education was an Associate degree (unweighted N = 13,791/weighted N = 1,296,809), and total population combining the former groups (unweighted N = 24,136/weighted N = 2,242,238).ResultsPrior health-related employment was associated with higher wages, with the strongest wage differences among BSN-educated RNs. Among BSN-educated RNs, previous employment as a health care manager, LPN/LVN, or nursing aide produced statistically higher starting wages ($1.72-$3.86 per hour; $3400–$7700 per year; p = 0.006–0.08). However, experience-based wage growth was lower for BSN-educated RNs previously employed as allied health workers, LPN/LVNs, or nursing aides. Among Associate degree-educated RNs, wage difference was not observed except for higher initial wage for RNs with previous employment as LPN/LVNs.ConclusionsPrior employment in health-related positions was associated with both starting salary and experience-based wage growth among BSN-educated RNs. The higher wage return for those with a BSN may motivate non-RN healthcare workers to seek a BSN in their transition to RN jobs, which could help advancement toward the 80 % BSN workforce recommended by the U.S. Institute of Medicine.Electronic supplementary materialThe online version of this article (doi:10.1186/s12913-016-1667-0) contains supplementary material, which is available to authorized users.

The returns to training in Russia: a difference‐in‐differences analysis

The experience of developed countries – particularly member‐states of the OECD – has shown that employers are actively investing in developing the human capital of their employees. According to research conducted by the World Bank, more than half of the companies in developed countries provide their employees with training in one form or another. There is, however, reason to believe that the situation is quite different in Russia. Some studies have shown that the level of investment in training in Russia is much lower. This difference can be explained by the fact that employers do not see the point in such investment because it is much easier to lure employees with the required qualifications than to train their own staff. Moreover, Russia faces a problem with high employee mobility, meaning that companies are not sure that they will get a return on their investment. Given these circumstances, the present study examines whether investments in human capital in Russia are profitable. It investigates the wage return to job‐related training using a difference‐in‐differences estimator to control for unmeasured differences in ability and measured differences in past wages as a proxy for ability and motivation. Estimates use panel data from The Russia Longitudinal Monitoring Survey – Higher School of Economics from 2004 to 2011. As predicted, positive returns to training are identified and the returns increase absolutely with the level of past wages.

Regional Wage Gaps, Education and Informality in an Emerging Country: The Case of Colombia

This paper uses Colombian micro-data to analyze the role of education and informality in regional wage differentials. The hypothesis is that apart from differences in the endowment of human capital, regional heterogeneity in the incidence of informality is another important source of regional wage inequality in emerging countries. This is confirmed by the evidence from Colombia, which also reveals remarkable spatial heterogeneity in the wage return to individuals’ characteristics. Regional heterogeneity in returns to education is especially intense in the upper part of the wage distribution. In turn, heterogeneity in the informal pay penalty is more relevant at the bottom.

The incidence and wage effects of overeducation using the vertical and horizontal mismatch in skills

Purpose– The purpose of this paper is to propose an improved concept of educational mismatch that combines a statistical measure of over- and undereducation with the worker’s self-assessment of skill utilization. The novelty of this measurement approach consists in identifying the vertical and horizontal nature of skills mismatch, that is, a mismatch in which skills are either over/underutilized or not utilized.Design/methodology/approach– Cross-sectional data from the Swiss Household Panel survey for the years 1999 and 2004 are used to determine the true extent of educational mismatch among workers. Moroever, different versions of the Duncan and Hoffman wage equation are estimated depending on whether basic or alternative measures of educational mismatch are included.Findings– The empirical analyses provide the following results: first, at least two-third of the statistically defined overeducated workers perceive their skills as adequate for the job they hold and are then apparently overeducated; second, overeducated workers whose skills are not related to the job do not receive any payoff to years of surplus education; and third, apparently overeducated workers have similar wage returns compared to others with the same schooling level but who are statistically matched. All in all, these findings confirm that most of those overeducated according to the statistical measure have unobserved skills that allow them to work in a job for which they are well-matched.Originality/value– The paper indicates the need to consider both vertical and horizontal skill mismatches when measuring educational mismatch in the labour market. In that way, it is possible to account for worker heterogeneity in skills whose omission may generate biased estimates of the incidence and wage effects of over- and undereducation.

The returns to migration and human capital accumulation pathways: non-metropolitan youth in the school-to-work transition

The school-to-work transition comprises a critical period of human capital development for young people. As school-to-work pathways become increasingly diverse and complex, there is growing evidence that transitions during this period significantly influence individual career trajectories and long-term earning capacities. For non-metropolitan youth, this period of the life course often involves migration to urban centres in the search for better educational and employment opportunities. Drawing on longitudinal data, this paper examines the influence of migration and school-to-work pathways on entry-level wages for non-metropolitan youth in Australia. Our results highlight that migration from non-metropolitan communities to urban centres leads to higher entry-level wages, but these wage gains are not immediate, rather they are realised at a period 3 years post-migration. Individuals remaining in non-metropolitan communities were found to experience pathways that lead to lower wage returns. Furthermore, unobserved attributes, such as motivation and aspirations, were found to be a major factor explaining the higher wage returns achieved by non-metropolitan migrants. Findings have important consequences for policy in their potential to contribute to new evidenced-based policy designed to entice the return of young people to non-metropolitan communities and ameliorate the long-standing net loss of young population from regional areas.

The impact of education on wage determination between workers in southern and central-northern Italy

The aim of this paper is to examine the earnings dynamic in Italy, in order to explain earnings differences between southern Italy and centralnorthern Italy. In our analysis we use different techniques: ordinary least squares (OLS), quantile regression models and the algorithm developed by Machado and Mata (2005). In particular, the Machado and Mata (2005) algorithm allows us to examine the relative importance of both differences in workers? characteristics and in their returns in explaining southern, central and northern Italy earnings differences at a point in time, as well as across time within each macro-area. We focus on the role of differences in educational endowment and returns to education, one of the most important components of human capital in the stylised literature. The level of education determines the substantial disparities in terms of wage returns. However, this holds only for levels of education related to compulsory education.

Brain Types and Wages

We examine the association between brain types and wages using the UK Behavioural Study data set for the period 2011–13. By applying empathizing–systemizing theory, the estimations suggest that, for men and women, systemizing traits are associated with higher wage returns than empathizing traits and that a Type S brain (entailing greater skills in directing systems) is associated with higher wage rewards than a Type E brain (entailing more social skills). Interestingly, the estimations suggest that the wage returns of empathizing and systemizing traits vary by occupation and that each trait might provide an absolute wage return advantage in certain occupations.