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The Returns to Skill in the United States across the Twentieth Century

Claudia Goldin, Lawrence F. Katz

NBER Working Paper No. 7126
Issued in May 1999
NBER Program(s):Labor Studies, Development of the American Economy

Economic inequality is higher today than it has been since 1939, as measured by both the wage structure and wealth inequality. But the comparison between 1939 and 1999 is largely made out of necessity; the 1940 U.S. population census was the first to inquire of wage and salary income and education. We address what the returns to skill were prior to 1940 and piece together the first century-long history of skill premiums, the dispersion of the wage structure, and returns to formal schooling. We use the 1915 Iowa State Census, a remarkable and unique document, as well as several less-obscure but untapped reports. Using all of these sources, we find that the wage structure narrowed at several moments in the first half of the 20th century, not just in the 1940s, both coinciding with major economic disruptions brought about by war. The returns to education were in fact higher in 1914 than in 1939, and the enormous expansion in secondary schooling beginning in the 1910s was a contributing factor to the decrease in educational returns. Inequality and the returns to education across the entire century, therefore, first declined before their more recent and steep ascent.

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Document Object Identifier (DOI): 10.3386/w7126

Published:

  • Published as "Amercia's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century", Journal of Economic History, Vol. 58, no. 2 (June 1998): 345-374. Published as "Egalitarianism and the Returns to Education During the Great
  • Transformation of American Education", Journal of Political Economy, Vol. 107, no. 6, part 2 (December 1999): S65-S94.

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