High Education, High Technology, and High Wages An Exploration into the Relationship between...
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High Education, High Technology, and High Wages An Exploration into the Relationship between University Education and Economic Prosperity and Dynamism: A California Wake-Up Call
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Transcript of High Education, High Technology, and High Wages An Exploration into the Relationship between...
High Education,High Technology, and High
Wages
An Exploration into the Relationship between University Education and Economic
Prosperity and Dynamism:
A California Wake-Up Call
Susan B. Carter
Mathew Sobek
Richard Sutch
Center for Social and Economic Policy
University of California
Riverside
California is aHigh Wage State
Opening Observation
1960 1965 1970 1975 1980 1985 1990 1995 2000480
520
560
600
640
680
United States
California
Median Real Wage1998 Dollars
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
1.00
1.05
1.10
1.15
1.20
1.25Index of Median Wages in California
US = 1
California’s High-Wage Status is Due in Part to
California’s Highly Educated Labor Force
California is aHigh Education State
Due in part to its long history of public and private support for education,
particularly higher education.
Educational Expenditures per FTE College Student, 1994-95
All Four-Year Institutions
Public and Private
Less than $14,000
$14,000 - $17,000
More than $17,000
1960 1965 1970 1975 1980 1985 1990 1995 200010
15
20
25
30
35
Percent of Full-Time Workerswith a College Education
United States
California
But, California is Losing its Relative Advantage
The proportion of
college-educated is falling
1960 1965 1970 1975 1980 1985 1990 1995 20001.00
1.10
1.20
1.30
1.40
California with US=1
Index of Highly-Educated Workers
College Degrees
The Proportion ofHigh-School Drop-Outs
in Californiahas Ceased to Fall
And California has fallen behind the rest of the country
1960 1965 1970 1975 1980 1985 1990 1995 20000
10
20
30
40
50Percent of Full-Time Workers
without a High School Education
United States
California
Something More than just the Educational Mix is
Influencing theWage Structure in
California
How do we know?
• Wages are higher in California, even after correcting for educational attainment levels– Wages of college grads are higher– Wages of high school grads are higher– Until recently, wages of drop outs were
higher
• Next Slide, please
1960 1965 1970 1975 1980 1985 1990 1995 20001.00
1.04
1.08
1.12
1.16
1.20
Index of Median W agesCollege Graduates in California
US=1
1960 1965 1970 1975 1980 1985 1990 1995 2000
1.00
1.04
1.08
1.12
1.16
1.20
Index of Median WagesHigh School Graduates in California
US=1
1960 1965 1970 1975 1980 1985 1990 1995 20000.80
0.90
1.00
1.10
1.20
1.30
Index of Median W agesHigh School Drop Outs in California
US=1
Taken together these trends imply ...
• Inequality in California is becoming greater – both absolutely and relative to the US
• Inequality Measure: The ratio of the wages of full-time workers at the 90th percentile to those at the tenth percentile– AKA: The 90/10 Pay Ratio
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 20002.0
3.0
4.0
5.0
6.0
Wage Inequality
90/10 Pay Ratio
United States
California
Why is California a High Wage State?
California is Technologically Advanced
• Silicon Valley– computers and telecommunication
• Military Contracts– Aircraft and Space
• Petrochemicals
• Our Proxy?
1880 1900 1920 1940 1960 1980 20000
20
40
60
80
Patenting IntensityPatents per 100,000
United States
California
1945 1955 1965 1975 1985 19950
10
20
30
40
United States
California
Patenting Intensity
Patents per 100,000
California’s High Patent Intensity is a reflection of
(a Proxy for)its High-Tech, Entrepreneurial
Environment
… And a High-Tech Environment May lead to Higher Wages for All
Relative Patenting IntensityCalifornia with US
= 100
1945 1955 1965 1975 1985 199590
100
110
120
130
140
150
1945 1955 1965 1975 1985 19950
10
20
30
40
50
60
70
80
90
100
Relative Patenting Intensity
South with US = 100
1945 1955 1965 1975 1985 19950
10
20
30
40
50
60
70
80
90
100
Relative Patenting IntensityUS = 100
Great North
Heartland
1945 1955 1965 1975 1985 1995
9 0
1 2 0
1 5 0
1 8 0
2 1 0
2 4 0
2 7 0
3 0 0
3 3 0
Relative Patenting IntensityUS = 100
New Jersey
Southern New EnglandNew York
1945 1955 1965 1975 1985 19950
30
60
90
120Relative Patenting Intensity
West with US = 100
1945 1955 1965 1975 1985 19955 0
8 0
1 1 0
1 4 0
1 7 0
2 0 0
Relative Patenting Intensity
US = 100
Rust Belt
Minnesota
Wisconsin
Universities Patents
High Tech
Universities Patents
High Tech
Adam B. Jaffee. “Real Effects of Academic Research.” American Economic Review 79 (December 1989).
Authority:
Universities Patents
High Tech
High Wages
Ow
n Education
Universities
High Wages
Alfred Marshall
Regression Model
• Data: CPS March 1994, ‘95, and ‘96
• Sample: Full-Time Male Workers– Age18-65– Born in the USA
• Dependent Variable: Log Weekly Wage
• Estimator: Weighted Least Squares
Own Education
• Four Separate Regressions– No High School Diploma:
– High School Diploma: – College Degree:– Advanced Degree:
– n = 4,642– n = 36,343– n = 11,831– n = 6,087
n = 58,903
Independent Variables
• Constant and Dummies for 1994 and 1995
• Third-Degree Polynomial in Age
• State-Level Externality Variables– Patents per capita, 1994-96 [Johnson]– Percent of all 19-21 year olds attending
college [CPS]– Educational Structure of State [next slide]
Educational Structure of State Workers
• All Workers (three out of four)– Percent that are HS Drop Outs– Percent that have HS Diploma– Percent that have College Degree– Percent that have Advanced Degree
• IDEA: You are more productive, if those around you are highly educated.
2 0 3 0 4 0 5 0 6 00
200
400
600
800
1000
1200
1400
Age-Wage Profile, 1994-96Full-Time Working Men, Born in the USA
Drop Outs
Advanced Degree
College
High School
Age
All the Marshallian Variables have Powerful Effects
• We can demonstrate this with a few examples ...
• Start with HS graduates in Arkansas and ask what the impact on wages in that State would be if it had:– high tech environment of Massachusetts– college enrollment of Massachusetts– educational attainment of Massachusetts
20 30 40 50 60
200
300
400
500
600
700
800
900
1000
Age-Wage Profile High School Graduates, Arkansas vs Massachusetts
Full-Time Working Men, Born in the USA
Arkansas
With Colleges
With Patents
Massachusetts
Age
With LF Mix
How Big Depends Upon the Example
• Start with High School Grads in North Dakota and ask what the impact on wages in that State would be if it had:
– high tech environment of New York– college enrollment of New York– educational attainment of New York
20 30 40 50 60
200
300
400
500
600
700
800
900
1000
Age-Wage Profile High School Graduates, North Dakota vs New York
Full-Time Working Men, Born in the USA
North Dakota
With Colleges
With PatentsNew York
Age
With LF Mix
20 30 40 50 60200
300
400
500
600
700
Age-Wage Profile High School Graduates, United States vs California
Full-Time Working Men, Born in the USA
United States
California
Age
Conclusion
• California’s Past Investments in Higher Education have fostered a High-Tech Environment and has supported a High Wage work force
• California is in danger of losing its edge• More support of higher education would yield
handsome dividends– to those educated– to others in the State
Dilemma
• Would not educating more Californians simply benefit the rest of the world at California Tax-Payers’ expense?– They could move to other States
• Test: Relative Retention of In-State College Degree Recipients– Measured by CS Method
C-S Method• In-migration measured as the difference
between– the number of 29 or 30 year-olds in the State with a
college degree in 1990
and– the expected number of surviving 19 or 20 year-olds
attending college in the State in 1980.
• Survival rates calculated for the cohort from the US totals [Census Survival Method].– See Carter and Sutch [1996] for details.
California is home to more college-educated people
than it has educated
During the decade 1980-1990, California was a net importer of college-educated people born in
1961 or 1962.
States by Net Importationof College Graduates, 1980-1990
Net importersNo net changeNet exporters
But, California is a net importer of people of all
educational levels
When we control for California’s population growth over the
decade, its status changes...
States by Net Importation of College Graduates,Controlling for Population Growth, 1980-1990
Net importerNo net changeNet exporter
In-migration is not improving California’s
Educational mix
Can California hold on to its High-Tech, High-Education, High-Wage
Position?
A stronger commitment to Higher Education would
help
