Book Description

This paper examines the long-term labour market premiums associated with a high school diploma. The focus is on the value of the qualification (the signaling effect), but the premiums associated with the number of years of schooling required to obtain the qualification (the human-capital effect) are also estimated. The labour market outcomes of individuals born in the mid-1960s are measured from their mid-20s to their mid-40s with longitudinal administrative data from the Longitudinal Worker File (LWF) that are linked to the 1991 Census of Population. Two groups are considered: terminal high school graduates (those who had obtained a high school diploma but had not acquired any postsecondary education by the 1991 Census) and individuals without a high school diploma (those who had no high school diploma, were not enrolled in high school, and had no postsecondary education at the time of the 1991 Census). The findings suggest that, after accounting for differences in the number of years of completed schooling and demographic characteristics, a high school diploma is associated with $83,000 to $123,000 in additional earnings for men and with $70,000 to $107,000 in additional earnings for women over the 20-year reference period. Men and women with a terminal high school diploma are covered by an employer-sponsored pension plan for about one additional year over the period. Furthermore, a high school diploma is associated with one to two additional years of employment for women. Finally, there is little evidence that a terminal high school diploma is associated with union membership or exposure to layoffs. The study also finds an important human-capital effect to staying in school. The average student with no high school diploma has 1.8 fewer years of schooling than does the average terminal high school graduate. The estimated value of completing those additional 1.8 years of schooling (without receiving the diploma) is about equivalent to obtaining the diploma itself.