Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry

Francois Rycx, Yves Saks and Ilan Tojerow
Additional contact information
Yves Saks: National Bank of Belgium

No 9043, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The labour market situation of low-educated people is particularly critical in most advanced economies, especially among youngsters and women. Policies aiming to increase their employability either try to foster their productivity and/or to decrease their wage cost. Yet, the evidence on the misalignment between education-induced productivity gains and corresponding wage cost differentials is surprisingly thin, inconclusive and subject to various econometric biases. We estimate the impact of education on productivity, wage costs and productivity-wage gaps (i.e. profits) using rich Belgian linked employer-employee panel data. Findings, based on the generalised method of moments (GMM) and Levinsohn and Petrin (2003) estimators, show a significant upward-sloping profile between education and wage costs, on the one hand, and education and productivity, on the other. They also systematically highlight that educational credentials have a stronger impact on productivity than on wage costs. This 'wage compression effect', robust across industries, is found to disappear among older cohorts of workers and to be more pronounced among women than men. Overall, findings suggest that particular attention should be devoted to the productivity to wage cost ratio of low-educated workers, especially when they are young and female, but also to policies favouring gender equality in terms of remuneration and career advancement.

Keywords: education; labour costs; productivity; linked panel data (search for similar items in EconPapers)
JEL-codes: C33 I21 J24 J31 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2015-05
New Economics Papers: this item is included in nep-edu, nep-eff and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published as 'Does Education Raise Productivity and Wages Equally ? The Moderating Role of Age and Gender' in: IZA Journal of Labor Economics, 2018, 7 (1), 1-37

Downloads: (external link)
https://docs.iza.org/dp9043.pdf (application/pdf)

Related works:
Working Paper: Does Education Raise Productivity and Wages Equally ?The Moderating Roles of Age, Gender and Industry (2015)
Working Paper: Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry (2015)
Working Paper: Does Education Raise Productivity and Wages Equally ?The Moderating Roles of Age, Gender and Industry (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp9043

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().