Skills, Degrees and Labor Market Inequality

Peter Q. Blair, Papia Debroy and Justin Heck

No 28991, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I24 I26 J01 J1 J2 J24 J3 J6 L2 (search for similar items in EconPapers)
Date: 2021-07
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