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Schooling as a Wage Depressant

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  • Edward P. Lazear

Abstract

We investigate the relationship between current schooling and current wage rates. Casual observation seems to reflect a discontinuity in wage rate growth which occurs when an individual completes school and joins the labor force as a permanent member. This suggests that the time spent in work while attending school is in some sense secondary. Here, the marginal value of the individual's time is considerably lower than the average value of his time. The problem is essentially one of "anti-complementarities" between the production of human capital through formal schooling and working in the primary occupation. More generally, the productivity of an individual's time in one endeavor is not independent of how the rest of his time is spent. If this is the case, students will be willing to accept lower paying jobs which do not greatly diminish the productivity of school time in lieu of jobs offering higher wages at the cost of a greater reduction in school time productivity. The wages of students, other things constant, are about 12% lower than those of non-students. The magnitude of this wage differential is surprisingly large and warrants investigation on empirical grounds alone. This paper explores the empirical relationship and examines various explanations for it. Finally, implications of the analyses are discussed.

Suggested Citation

  • Edward P. Lazear, 1975. "Schooling as a Wage Depressant," NBER Working Papers 0092, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0092
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    References listed on IDEAS

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    1. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 74-103, Part II, .
    2. Lazear, Edward P, 1976. "Age, Experience, and Wage Growth," American Economic Review, American Economic Association, vol. 66(4), pages 548-558, September.
    3. Elisabeth M. Landes, 1974. "Male-Female Differences in Wages and Employment: A Specific Human Capital Model," NBER Working Papers 0029, National Bureau of Economic Research, Inc.
    4. Parsons, Donald O, 1974. "The Cost of School Time, Foregone Earnings, and Human Capital Formation," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 251-266, Part I, M.
    5. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
    6. Johnson, Thomas, 1970. "Returns from Investment in Human Capital," American Economic Review, American Economic Association, vol. 60(4), pages 546-560, September.
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    Cited by:

    1. Lazear, Edward P, 1977. "Education: Consumption or Production?," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 569-597, June.
    2. Alan L. Gustman & Thomas L. Steinmeier, 1979. "The Impact of the Market and the Family on Youth Employment and Labor Supply," NBER Working Papers 0415, National Bureau of Economic Research, Inc.

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