Summary and Discussion
We began this report by comparing long-term wage growth--a measure of upward mobility--for two cohorts of young white men. These men entered the labor market during very different economic periods, with the original cohort entering in the late 1960s, at the tail of the post-World War II economic boom, and the recent cohort entering in the early 1980s after the onset of economic restructuring.
We found that long-term wage growth between the ages of 16 and 36 has both declined and become significantly more unequal for the recent cohort. The declines have been concentrated among less educated workers--that is, high school dropouts and high school graduates. Also worrisome are our findings for workers with sub-baccalaureate degrees or only some college experience. While these workers have a clear advantage over high school graduates in terms of wage growth, that advantage has not increased noticeably in recent years. By contrast, young adults with a bachelor's degree or higher have seen increases in their wage growth. The rising demand for education and skill in the new labor market has apparently benefited only those with four-year college degrees. It has not trickled down to improve the wage growth of those with some college experience or associate's degrees.
Education is not the whole story, however, because we found rising inequality in wage growth withinall education groups. Thus, there has been a dramatic reduction in mobility opportunities for less-educated young men, but even among the well-educated, there are now many more extreme winners and losers. Educational credentials no longer ensure success with the certainty that they once did.
These trends raise a difficult challenge to public policies aimed at improving the living standards and upward mobility of American workers. Simply pushing for more education is not the magic bullet--the increase in inequality has been just as strong within education groups as between them. Moreover, bachelor's degrees are (and will remain) outside the reach of the majority of workers in the foreseeable future. The common response has been to call for greater use of community colleges and sub-baccalaureate college degrees. Yet we have seen no increase in the amount of wage growth that young adults with associate's degrees can expect to experience. Like high school graduates, their wage growth has remained flat over the past three decades (though it is still higher than that of high school graduates). Part of this may be due to a perception problem on the part of employers, but it may also have to do with lack of adequate preparation on the part of the students. The upshot, then, is that a policy focused on educational credentials alone is likely too simple.
We therefore asked whether there are other aspects of the way that young adults now acquire education that might help us to better explain the rise in inequality and also better inform education and training policy. For example, we found that young adults in recent years are taking longer to complete their education. Working while enrolled and interrupting and returning to school are now the dominant pathways to educational attainment. Interruptions in particular have become more prevalent among the less educated. On both fronts, we may be witnessing an attempt by young workers to meet the rising demand for education in the labor market--for example, by taking a job to support oneself during college, by returning to finish a degree after several years in the labor market, or by taking several applied courses to complement a high school degree. The question is whether these emerging pathways have paid off. Descriptive evidence suggests that they have been beneficial for some workers but not for others. In particular, there has been a deterioration in wage growth when interrupting and then returning to school--especially among those with only some college experience or with associate's degrees. It also appears that the new pathways are generating more polar and unequal wage outcomes in recent years, especially interruptions to schooling.
In order to gain further insight into these dynamics, we performed a second set of analyses that focused on the recent cohort only--the young men who entered the labor market in the 1980s 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 were 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.
Using multiple regression models, we found that educational pathways do indeed have a strong effect on long-term wage growth: working while enrolled has a positive impact and interrupted schooling has a negative impact. Since both of these pathways have become dominant in recent years, it is clear that decisions about how to pursue education are critical in determining eventual success in the new economy. Career choices about industry and occupation matter as well, in ways one would expect (e.g., unionized sectors offer more wage growth than low-wage service industries). In addition, we found that taking an academic track in high school can pay off for some workers--those who get some college credit but do not attain a degree, and those who enter occupations that require cognitive skill. Once in college, however, it is applied and practical fields of study that offer the most long-term wage growth to those receiving a degree. While these other features of early career development are clearly of interest, it is important to note that they do not lessen the strong effect of the two educational pathways.13
Thus, we have evidence of a complex matrix of decisions about how to enter the labor market, where different combinations of choices lead to very different outcomes. Taken as a whole, these factors explain a significant amount of the inequality in upward mobility, above and beyond simply the amount of education attained. Our findings may therefore serve as a point of intervention for policymakers. For example, the trend toward working while in school has apparently been beneficial to many workers. This would suggest the development of policies that support more flexible education paths and, in particular, the mixing of work and schooling over time. Greater flexibility in choices about field of study and occupational direction may be helpful as well.
It is also clear that there are drawbacks to flexibility because interruptions to school have a strong, negative impact on wage growth; however, especially for youth with few resources, interruptions and returns to school may in fact be the only way to attain better education credentials. Thus, the choice between staying with an employer and acquiring firm-specific skills or returning to school in order to gain additional skills has important consequences. Theoretically, the argument for continuous learning in a knowledge-based economy is attractive. The reality, however, is that many young adults who make a considerable effort to upgrade their skills are not faring well. This is clearly an area in which educational policy, perhaps in the form of financial help or innovative enrollment programs, could have a strong impact on worker welfare.
In fact, interrupted schooling is generating greater inequality across all education levels, so that some workers see a high pay-off in terms of upward mobility, while others do not. This suggests that increased movement between school and work in the search for more education may have costs for some groups of workers, causing a type of churning between school and the labor market that has few long-term benefits and that comes at the expense of building up continuous tenure with one employer. Better understanding of under what conditions choices about work and education do and do not pay off is an important agenda for future research (e.g., we have not been able to explore the importance of finding a job that is related to one's field of study). Whatever the focus, however, such research should give close attention to the experiences of less educated workers. Recall that we were less successful in explaining variability in wage outcomes for this group than for better educated workers. Ultimately, however, it is precisely those at the bottom of the labor market that need the most help from public policy.