Educational Expansion, Skill-biased Technological Change and Occupational Returns to Education. A Trend Analysis of Tertiary Graduates’ Employment Outlook

In the light of educational expansion, occupational upgrading, and macroeconomic changes the project addressed the question to what extent these interacting developments have an impact on occupational returns to education in West Germany over the course of time. The project aimed to empirically assess both long-term trends in the returns to education as well as changes in most recent times. For this purpose, the project made use of a long series of Microcensus data covering the period between 1976 and 2008. Labour market returns among higher education graduates were assessed both in absolute terms as well as relative terms in comparison to graduates with lower educational attainment. On the one hand, the analyses were set up to check tertiary education experienced devaluation in terms of a decrease of absolute returns over time. On the other hand, the study intended to identify changes in the association between educational attainment and occupational positions across labour market entry cohorts. Given the increasing diversification in the higher education system further analyses concentrated on field-specific changes in labour market returns as well as outcome differences between universities and polytechnics over the course of time. In contrast to prior studies the project pursued a multidimensional framework of labour market returns that takes various aspects of labour market rewards equally into account.Occupational returns to higher education in West Germany remained remarkably stable between the mid-1970s and the present. Credential inflation fears have thus not come true. Further, we do not see a steady decoupling of the historically strong association between educational and occupational system over the course of time. The gap in unemployment risks between the lowest educated without vocational training and the higher educated has even become stronger throughout the observation period. With regard to the comparison of tertiary educational tracks we do not see a convergence of labour market outcomes between university and Fachhochschule graduates over time. Throughout educational expansion field of study differences in labour market returns have not become substantially larger as well. Individual investments in one’s educational attainment seem to pay off at present as much as in former times.