Working Paper: NBER ID: w28991
Authors: Peter Q. Blair; Papia Debroy; Justin Heck
Abstract: Over the past four decades, income inequality grew significantly between workers with bachelor’s degrees and those with high school diplomas (often called “unskilled”). Rather than being unskilled, we argue that these workers are STARs because they are skilled through alternative routes—namely their work experience. Using the skill requirements of a worker’s current job as a proxy of their actual skill, we find that though both groups of workers make transitions to occupations requiring similar skills to their previous occupations, workers with bachelor’s degrees have dramatically better access to higher-wage occupations where the skill requirements exceed the workers’ observed skill. This measured opportunity gap offers a fresh explanation of income inequality by degree status and reestablishes the important role of on-the-job training in human capital formation.
Keywords: Labor Market Inequality; Skills; Degrees; On-the-Job Training
JEL Codes: I24; I26; J01; J1; J2; J24; J3; J6; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Educational attainment (I21) | Access to higher-wage occupations (J62) |
| Skill requirements (J24) | Access to higher-wage occupations (J62) |
| Opportunity gap (I24) | Wage inequality (J31) |
| Skill distance (J24) | Job transition flow rates for 'stars' (J62) |
| Relative skill mobility friction (RSMF) (J62) | Opportunity gap for 'stars' (D29) |