Why Do Wages Grow Faster for Educated Workers?

June 2023, Paper: "The U.S. college wage premium doubles over the life cycle, from 27 percent at age 25 to 60 percent at age 55. Using a panel survey of workers followed through age 60, I show that growth in the college wage premium is primarily explained by occupational sorting. Shortly after graduating, workers with college degrees shift into professional, nonroutine occupations with much greater returns to job tenure. Educated workers are more likely to switch jobs right after completing schooling, but less likely to switch jobs thereafter. As a result, the rising college premium is mostly explained by wage growth within rather than between jobs. To understand these patterns, I develop a model of human capital investment where workers differ in learning ability and jobs vary in complexity. Faster learners sort into complex jobs with greater returns to investment. College acts as a gateway to better jobs, which offer more opportunity for skill development and on-the-job learning."