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High Education, High Technology, and High Wages: 

High Education, High Technology, and High Wages An Exploration into the Relationship between University Education and Economic Prosperity and Dynamism: A California Wake-Up Call

Slide3: 

Susan B. Carter Mathew Sobek Richard Sutch Center for Social and Economic Policy University of California Riverside

California is a High Wage State: 

California is a High Wage State Opening Observation

Slide5: 

1960 1965 1970 1975 1980 1985 1990 1995 2000 480 520 560 600 640 680 United States California Median Real Wage 1998 Dollars

Slide6: 

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 1.00 1.05 1.10 1.15 1.20 1.25 Index of Median Wages in California US = 1

California’s High-Wage Status is Due in Part to California’s Highly Educated Labor Force: 

California’s High-Wage Status is Due in Part to California’s Highly Educated Labor Force

California is a High Education State: 

California is a High Education State Due in part to its long history of public and private support for education, particularly higher education.

Slide9: 

Educational Expenditures per FTE College Student, 1994-95 All Four-Year Institutions Public and Private Less than $14,000 $14,000 - $17,000 More than $17,000

Slide10: 

1960 1965 1970 1975 1980 1985 1990 1995 2000 10 15 20 25 30 35 Percent of Full-Time Workers with a College Education United States California

But, California is Losing its Relative Advantage: 

But, California is Losing its Relative Advantage The proportion of college-educated is falling

Slide12: 

1960 1965 1970 1975 1980 1985 1990 1995 2000 1.00 1.10 1.20 1.30 1.40 California with US=1 Index of Highly-Educated Workers College Degrees

The Proportion of High-School Drop-Outs in California has Ceased to Fall: 

The Proportion of High-School Drop-Outs in California has Ceased to Fall And California has fallen behind the rest of the country

Slide14: 

1960 1965 1970 1975 1980 1985 1990 1995 2000 0 10 20 30 40 50 Percent of Full-Time Workers without a High School Education United States California

Something More than just the Educational Mix is Influencing the Wage Structure in California: 

Something More than just the Educational Mix is Influencing the Wage Structure in California

How do we know?: 

How do we know? Wages are higher in California, even after correcting for educational attainment levels Wages of college grads are higher Wages of high school grads are higher Until recently, wages of drop outs were higher Next Slide, please

Slide18: 

1960 1965 1970 1975 1980 1985 1990 1995 2000 1.00 1.04 1.08 1.12 1.16 1.20 Index of Median Wages High School Graduates in California US=1

Taken together these trends imply ...: 

Taken together these trends imply ... Inequality in California is becoming greater both absolutely and relative to the US Inequality Measure: The ratio of the wages of full-time workers at the 90th percentile to those at the tenth percentile AKA: The 90/10 Pay Ratio

Slide21: 

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2.0 3.0 4.0 5.0 6.0 Wage Inequality 90/10 Pay Ratio United States California

Why is California a High Wage State?: 

Why is California a High Wage State?

California is Technologically Advanced: 

California is Technologically Advanced Silicon Valley computers and telecommunication Military Contracts Aircraft and Space Petrochemicals Our Proxy?

Slide24: 

1880 1900 1920 1940 1960 1980 2000 0 20 40 60 80 Patenting Intensity Patents per 100,000 United States California

Slide25: 

1945 1955 1965 1975 1985 1995 0 10 20 30 40 United States California Patenting Intensity Patents per 100,000

California’s High Patent Intensity is a reflection of (a Proxy for) its High-Tech, Entrepreneurial Environment: 

California’s High Patent Intensity is a reflection of (a Proxy for) its High-Tech, Entrepreneurial Environment … And a High-Tech Environment May lead to Higher Wages for All

Slide27: 

Relative Patenting Intensity California with US = 100 1945 1955 1965 1975 1985 1995 90 100 110 120 130 140 150

Slide28: 

1945 1955 1965 1975 1985 1995 0 10 20 30 40 50 60 70 80 90 100 Relative Patenting Intensity South with US = 100

Slide29: 

Relative Patenting Intensity US = 100 Great North Heartland

Slide30: 

Relative Patenting Intensity US = 100 New Jersey Southern New England New York

Slide31: 

Relative Patenting Intensity West with US = 100

Slide32: 

Relative Patenting Intensity US = 100 Rust Belt Minnesota Wisconsin

Slide33: 

Universities Patents High Tech

Slide34: 

Universities Patents High Tech Adam B. Jaffee. “Real Effects of Academic Research.” American Economic Review 79 (December 1989). Authority:

Slide35: 

Universities Patents High Tech High Wages Own Education

Slide36: 

Universities High Wages Alfred Marshall

Regression Model: 

Regression Model Data: CPS March 1994, ‘95, and ‘96 Sample: Full-Time Male Workers Age18-65 Born in the USA Dependent Variable: Log Weekly Wage Estimator: Weighted Least Squares

Own Education: 

Own Education Four Separate Regressions No High School Diploma: High School Diploma: College Degree: Advanced Degree: n = 4,642 n = 36,343 n = 11,831 n = 6,087 n = 58,903

Independent Variables: 

Independent Variables Constant and Dummies for 1994 and 1995 Third-Degree Polynomial in Age State-Level Externality Variables Patents per capita, 1994-96 [Johnson] Percent of all 19-21 year olds attending college [CPS] Educational Structure of State [next slide]

Educational Structure of State Workers: 

Educational Structure of State Workers All Workers (three out of four) Percent that are HS Drop Outs Percent that have HS Diploma Percent that have College Degree Percent that have Advanced Degree IDEA: You are more productive, if those around you are highly educated.

Slide42: 

Age-Wage Profile, 1994-96 Full-Time Working Men, Born in the USA Drop Outs Advanced Degree College High School Age

All the Marshallian Variables have Powerful Effects: 

All the Marshallian Variables have Powerful Effects We can demonstrate this with a few examples ... Start with HS graduates in Arkansas and ask what the impact on wages in that State would be if it had: high tech environment of Massachusetts college enrollment of Massachusetts educational attainment of Massachusetts

Slide44: 

20 30 40 50 60 200 300 400 500 600 700 800 900 1000 Age-Wage Profile High School Graduates, Arkansas vs Massachusetts Full-Time Working Men, Born in the USA Arkansas With Colleges With Patents Massachusetts Age With LF Mix

How Big Depends Upon the Example: 

How Big Depends Upon the Example Start with High School Grads in North Dakota and ask what the impact on wages in that State would be if it had: high tech environment of New York college enrollment of New York educational attainment of New York

Slide46: 

20 30 40 50 60 200 300 400 500 600 700 800 900 1000 Age-Wage Profile High School Graduates, North Dakota vs New York Full-Time Working Men, Born in the USA North Dakota With Colleges With Patents New York Age With LF Mix

Slide47: 

20 30 40 50 60 200 300 400 500 600 700 Age-Wage Profile High School Graduates, United States vs California Full-Time Working Men, Born in the USA United States California Age

Conclusion : 

Conclusion California’s Past Investments in Higher Education have fostered a High-Tech Environment and has supported a High Wage work force California is in danger of losing its edge More support of higher education would yield handsome dividends to those educated to others in the State

Dilemma: 

Dilemma Would not educating more Californians simply benefit the rest of the world at California Tax-Payers’ expense? They could move to other States Test: Relative Retention of In-State College Degree Recipients Measured by CS Method

C-S Method: 

C-S Method In-migration measured as the difference between the number of 29 or 30 year-olds in the State with a college degree in 1990 and the expected number of surviving 19 or 20 year-olds attending college in the State in 1980. Survival rates calculated for the cohort from the US totals [Census Survival Method]. See Carter and Sutch [1996] for details.

California is home to more college-educated people than it has educated: 

California is home to more college-educated people than it has educated During the decade 1980-1990, California was a net importer of college-educated people born in 1961 or 1962.

Slide52: 

States by Net Importation of College Graduates, 1980-1990 Net importers No net change Net exporters

But, California is a net importer of people of all educational levels: 

But, California is a net importer of people of all educational levels When we control for California’s population growth over the decade, its status changes...

Slide54: 

States by Net Importation of College Graduates, Controlling for Population Growth, 1980-1990 Net importer No net change Net exporter

In-migration is not improving California’s Educational mix: 

In-migration is not improving California’s Educational mix Can California hold on to its High-Tech, High-Education, High-Wage Position?

A stronger commitment to Higher Education would help: 

A stronger commitment to Higher Education would help

End of Show: 

End of Show Comments welcome send e-mail to: susan.carter@ucr.edu sobek@ucr.edu richard.sutch@ucr.edu