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Basic Skills or Major-Specific Knowledge? Sources of Wage Penalties for Working Outside the Major Field of Study

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  • Yuki Onozuka

    (Otaru University of Commerce)

Abstract

This paper examines the sources of wage penalties for working outside one’s major field of study. Workers in jobs that are unrelated to their major field of study tend to earn significantly lower wages than those in a field-related jobs, and a substantial amount of human capital may be underutilized. Identifying the sources of this wage penalty is important for understanding how to decrease inefficiencies in the use of human capital. I use the 1993 National Survey of College Graduates and the O*NET to divide the sources of wage penalty into levels of two-types of basic skills required in a job and a mismatch in major-specific knowledge. The results show that, on average, the wage penalty is 10% after conditioning on individual characteristics such as degree type and field of study. More than half of the remaining wage penalty stems from differences between closely related and unrelated jobs in the required levels of basic skills. This result is not very different from the case controlling for a college job dummy instead of the required levels of basic skills. This is because that closely related and unrelated college jobs that workers tend to hold are similar in the required levels of basic skills. The importance of a mismatch in major-specific knowledge is found to be heterogeneous across degree types and fields of study. The mismatch has a large effect on the wage of workers with a specialized degree and on those who majored in computer and math sciences or engineering.

Suggested Citation

  • Yuki Onozuka, 2022. "Basic Skills or Major-Specific Knowledge? Sources of Wage Penalties for Working Outside the Major Field of Study," Journal of Labor Research, Springer, vol. 43(1), pages 24-64, March.
    • Handle: RePEc:spr:jlabre:v:43:y:2022:i:1:d:10.1007_s12122-022-09330-5
    DOI: 10.1007/s12122-022-09330-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Major field of study; Multi-dimensional human capital; Mismatch; Wage differentials;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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