Introduction

        After a period of stagnant productivity and large trade deficits in the 1980s, the United States economy has bounced back and is showing renewed vitality and global competitiveness. Yet the striking increase in wage inequality that started in the late 1970s has not been reversed, and the wage stagnation that accompanied it has only recently begun to lessen.[1] These trends have raised concern about opportunities for upward mobility in the post-industrial economy. In fact, new research suggests that the earnings that workers make over their career have become more unequal over the past three decades (McMurrer & Sawhill, 1998). In particular, while some youth continue to follow the traditional career path, eventually settling into a stable job that brings regular wage gains over time, others increasingly cycle between a series of low-wage and dead-end jobs, and so fail to experience the income growth that is the backbone of upward mobility (Duncan, Boisjoly, & Smeeding, 1996; Newman & Lennon, 1995).

        In an effort to understand the growing inequality in wage outcomes, the role of education has been widely explored. During the 1980s and 1990s, real wages plummeted for workers with few skills and little education. By contrast, workers with college degrees actually saw a mild increase in real wages (Danziger & Gottschalk, 1993; Levy & Murnane, 1992). This has led many policymakers to stress the rising returns to education in the labor market. But the education effects only go so far in explaining the overall growth in inequality, more than half of which has occurred withingroups of workers of the same education, age, and experience (Katz & Murphy, 1992). To wit, in the new economy, there are college graduates who do not fare well, there are high school graduates who do, and in between lies an entire spectrum of other routes to success and failure that are not captured by simply looking at years of education completed. From the standpoint of education, training, and school-to-work policy, it is important that we understand why.

        In this report, we ask whether there are other dimensions to education that might add to our understanding of rising wage inequality. Specifically, we focus on howyoung adults acquire their education, developing a dynamic approach that incorporates the continuity of schooling, the combination of schooling with work, as well as decisions about high school curriculum, fields of study in college, and industry and occupation. We identify workers taking different educational and working paths and ask which of these paths pay off for long-term wage growth and career development. We then test whether the educational pathways enable us to explain more of the variability in wage outcomes.

        The motivation for this approach is simple. Given that not everyone can attain a four-year bachelor's degree, are there educational choices in the new economy that can nevertheless confer some benefit and restore the ability to build a stable career with solid wage growth? Are there others that clearly should be avoided, if possible? For example, we will show that education is taking longer to complete and that significant numbers of young adults are interrupting their schooling, moving back and forth between school and the labor market. The choice between staying with an employer and acquiring firm-specific skills, or returning to school in order to gain additional skills, may have important consequences. If returning to school yields successful outcomes, then this would support the argument for continuous learning in a knowledge-based economy, suggesting policies aimed at fostering flexible education paths. However, such interruptions to entry into the labor market may also indicate a type of churning that has few long-term benefits and that comes at the expense of building up continuous tenure with one employer.

        In order to analyze trends in education and work paths and their wage consequences, we compare longitudinal data on early career development for two cohorts of young white men--the first is followed from the late 1960s through the 1970s; the second from the 1980s through the early 1990s. We focus on the total amount of wage growth attained between the ages of 16 and 36. This is a key innovation because it allows us to ask the important question of how and why upwardmobilityhas changed (as opposed to simply wages at one point in time). Our analysis consists of two distinct stages. In the first stage, we compare the two cohorts of young workers, describing changes over the past thirty years in wage growth, distinct educational paths, and the effects of those paths on wage growth. The second stage of the analysis then focus on the recent cohort only: the young men who entered the labor market in 1980 and who experienced the negative trends in wages that have garnered so much policy concern. Because data quality is much better for this cohort, we are able to systematically test whether there are characteristics of early career development--beyond simply the amount of education gained--that lead to success or to failure in the new labor market. These characteristics include the distinct educational pathways, high school track, field of study in college, and industry and occupation. Our intuition is that these factors will help us to better explain the observed rise in inequality and also better inform education and training policy.

[1]Rising inequality in wage outcomes has been documented for all workers, regardless of race or gender, although it is most pronounced for white men.