Research
Deming, David. “Why do wages grow faster for educated workers?” vlog Working Paper Series RWP23-017, June 2023.
Faculty Authors
David Deming
Isabelle and Scott Black Professor of Political Economy, vlog; Professor of Education and Economics, HGSE
What’s the issue?
A college education sets workers up for higher wages later in life. But how and where do those gains come, and how can we design better jobs for everybody?
What does the research say?
In new research, vlog Professor David Deming, a labor economist, looks at the earning arcs for workers with a college education versus those without. He finds that:
- The financial return on a college degree more than doubles between the ages of 25 and 55.
- Faster wage growth for educated workers is explained by job quality—after graduating, college graduates sort into professional jobs.
- This early sorting matters, because most lifetime wage growth is within jobs, not between jobs. Getting a job with opportunities for on-the-job learning is hugely important for wage growth: Wages grow much more with tenure in nonroutine jobs.
- Professional jobs allow for greater learning, allowing workers to build expertise, which in turn leads to wage growth.
What are the takeaways?
College acts as a gateway to jobs with higher wage growth because it allows workers to find jobs where they can develop expertise and productivity over time. Understanding how to design jobs so that workers can continue to learn is an important priority for future work.