High School Graduation, Performance and Earnings

Using data from the Panel Study of Income Dynamics and a proprietary sample of semi-skilled production workers, this paper investigates the reasons for the discontinuous increase in wages associated with graduation from high school. Associated with graduation from high school, we find a discontinuous decrease in a worker's propensities to quit or be absent. However, we do not find that high school graduates have a comparative advantage on production jobs requiring more training, nor, in the PSID sample, are high school graduates assigned to jobs requiring more training. Finally, we find that the wage premium associated with graduation from high school vanishes during severe slumps, periods in which employers are likely to be hoarding labor and in which quits and absences are least important to firms. We conclude from this evidence that the sorting model of education provides a better explanation for the higher wages of high school graduates than does the human capital model.