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The true returns to the choice of occupation and education

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  • Andrew E. Clark
  • Maria Cotofan
  • Richard Layard

Abstract

Which occupations are best for wellbeing? There is a large literature on earnings differentials, but less attention has been paid to occupational differences in non-pecuniary rewards. However, information on both types of rewards is needed to understand the dispersion of wellbeing across occupations. We analyse subjective wellbeing in a large representative sample of UK workers to construct a measure of "full earnings", the sum of earnings and the value of non-pecuniary rewards, in 90 different occupations. We first find that the dispersion of earnings underestimates the extent of inequality in the labour market: the dispersion of full earnings is one-third larger than the dispersion of earnings. Equally, the gender and ethnic gaps in the labour market are larger than data on earnings alone would suggest, and the true returns to completed secondary education (though not to a degree) are underestimated by earnings differences on their own. Finally, we show that our main results are similar, and stronger, for a representative sample of US workers.

Suggested Citation

  • Andrew E. Clark & Maria Cotofan & Richard Layard, 2021. "The true returns to the choice of occupation and education," CEP Discussion Papers dp1746, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1746
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    1. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    2. Clark, Andrew E. & Senik, Claudia, 2006. "The (unexpected) structure of "rents" on the French and British labour markets," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 180-196, April.
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    4. Alan Carruth & William Collier & Andy Dickerson, 2004. "Inter‐industry Wage Differences and Individual Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 811-846, December.
    5. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(1), pages 113-134.
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    Keywords

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    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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