Recent research concludes that wage returns to cognitive skills have declined in the U.S. We reassess this finding. Using decomposition methods, we document the pivotal role played by dynamic shifts in the distributions of pre-labor market cognitive skills. Our findings show these shifts explain the declining estimated returns to cognitive skills, especially for white men. We discard measurement error as a potential driver. Although often overlooked, grappling with changing pre-labor market skill distributions is necessary for capturing the evolution of labor market returns to cognitive skills. This may prove especially important in the future given continuing changes in skill development in recent youth cohorts.
Authors
- Acknowledgements & Disclosure
- We thank Katharine Abraham, Dan Black, Melissa Kearney, Richard Murphy, Nolan Pope, and seminar participants at the University of Chicago, George Washington University, SUNY-Buffalo, UIUC, University of Cambridge, George Mason University, and SED 2023 annual meeting for valuable comments. We are grateful to Rosella Gardecki, Mark Loewenstein, Randy Olsen, Donna Rothstein, and other researchers at the Bureau of Labor Statistics and the Center for Human Resource Research (CHRR) at the Ohio State University for their help with the data. Errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w32229
- Published in
- United States of America
