Why do Wages Grow Faster for Educated Workers?

1 I then study the relationship between early career job mobility and wage growth, ex- tending the analyses of Topel and Ward (1992) and von Wachter and Bender (2006) to the 1979 and 1997 cohorts of the National Longitudinal Survey of Youth (NLSY) but focusing on differences in job mobility patterns by education. [...] I close the model by introducing imperfect substitution across occupations, which causes wages to adjust until the marginal worker is indifferent between sectors.3 With reasonable assumptions about the distribution of learning ability and the assignment of workers to tasks, the model delivers a simple characterization of life-cycle college wage premia and occupational wage differentials. [...] Both the NLSY79 and the NLSY97 surveys include consistent and detailed measures of education and premarket skills, employment, wages and earnings, and occupation and employer history. [...] Yet if educated and higher-paid workers stay more attached to the labor force over time and work longer hours, potential experience may understate the wage premium to actual work experience.16 Appendix Figure A3 quantifies the bias of potential experience by plotting the difference between potential and actual experience by age and education level in the NLSY79 data. [...] The net impact of job mobility on wage growth combines the impact of job-to-job switches with the impact of transitions to and from nonemployment.