March 05, 2015

Do highly-educated people improve prospects and earnings for their peers?

Do highly-educated people improve prospects and earnings for their peers?

Evidence shows that areas with strong levels of education:

  • benefit from higher levels of productivity
  • demonstrate higher earnings on average
  • pay higher wages to less-educated workers

Formal schooling has obvious positive impacts upon individual earnings and employment prospects, but do these benefits “rub off” on one’s peers? A new article by John V. Winters discusses how regions with higher than average education levels also demonstrate higher than average earnings, even among workers with relatively little formal qualifications or training.

A strong population of college graduates, particularly STEM graduates, correlates with notably high productivity and salary levels.

However, correlation does not equal causation, and there may be many factors which affect education and wage levels which are more difficult to assess. Highly educated workers may move to areas which already pay high wages, for example.

Nonetheless, Winters advocates public policies which increase the stock of college graduates, including native and foreign students, which are likely to benefit nations and regions in the short- and long-term.

Do local clusters of human capital have societal benefits? by John V. Winters, was published on 5th March 2015.

IZA World of Labor is a free, online resource created by the Institute for the Study of Labor (IZA) in collaboration with Bloomsbury Publishing Plc. Articles focus on global labor economics issues, drawing on empirical, evidence-based research in order to offer pertinent comment and evaluation, and best-practice policy advice.

John V. Winters is Professor of Economics at Oklahoma State University and has been published in journals such as the Journal of Human Resources, the Industrial and Labor Relations Review, and the Economics and Education Review. He joined the IZA as a Research Fellow in 2012.