Education and Income in the Early 20th Century: Evidence from the Prairies

We present the first estimates of the returns to years of schooling before 1940 using a large sample of men and women, employed in a variety of sectors and occupations, from the Iowa State Census of 1915. We find that the returns to a year of high school, and to a year of college, were substantial in 1915 - about 11 percent for all males and in excess of 12 percent for young males. Some of the return to years of high school and college arose because more education allowed individuals to enter lucrative white-collar jobs. But we also find sizable educational wage differentials within the white- and blue-collar sectors. Returns to education above the 'common school' grades were substantial even within the agricultural sector. Given the high overall rate of return to secondary schooling, it is no wonder that the 'high school movement' took root in America around 1910, even in agricultural areas such as Iowa. Census data for 1940, 1950, and 1960 are used to show that returns to years of schooling were greater in 1915 than in 1940. We conclude that the return to education decreased sometime between 1915 and 1940 and then declined again during the 1940s.