Meet the Author

Dionissi Aliprantis |

Research Economist

Dionissi Aliprantis

Dionissi Aliprantis is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in applied econometrics, labor and urban economics, and education. His current work investigates neighborhood effects on education and labor market outcomes.

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Mary Zenker |

Research Analyst

Mary Zenker

Mary Zenker is a former research analyst in the Research Department at the Federal Reserve Bank of Cleveland.

03.02.11

Economic Trends

Educational Attainment and Employment

Dionissi Aliprantis and Mary Zenker

Labor market experiences can be highly varied for individuals with different levels of educational attainment. Higher levels of educational attainment tend to be associated with higher wages, and there is evidence that the benefits of a degree have been increasing in recent decades in the United States. For example, the wages of high school dropouts have dropped since the early 1970s, while the wages of college graduates relative to high school graduates have increased. Empirical facts like these make it unsurprising that a great deal of attention has recently been focused on the relative performance of American students in terms of both educational attainment and achievement.

Given this changing wage structure, a natural issue to investigate is whether other employment outcomes have also changed by education levels over time. A look at labor force participation rates and unemployment patterns using data from the Bureau of Labor Statistics shows they have.

First we see that high school dropouts have actually increased their labor force participation slightly since the early nineties, despite their decreasing wages. This contrasts with all other education groups, which all experienced gradual decreases in labor force participation rates. What may be most striking about this picture is the huge gap between high school dropouts and all other groups, which is very gradually closing.

Once individuals decide to participate in the labor market, how do their experiences differ by educational attainment? We see the expected differences in unemployment rate: Those with a college degree or higher have the lowest unemployment rates over time, and the unemployment rate increases as attainment decreases. The unemployment rate approximately doubled for each group during the recent recession. Since those with low educational attainment already started out with higher unemployment rates, this doubling translates into larger absolute changes for these attainment groups. That is, while we see similar patterns for all groups, higher educational attainment is associated with smaller changes in unemployment.

The story of unemployment duration is quite different. The recent recession caused a very large spike in the length of time workers remain unemployed, and spells of unemployment are now similar for workers at all levels of educational attainment. It is interesting that the differences in labor force participation and unemployment rates do not translate into differences for duration.

Many factors influence the labor market, and thus it is difficult to conclude that educational attainment alone drives labor market outcomes. Nevertheless, the evidence examined here suggests important relationships between educational attainment and labor market outcomes.