CHANGES IN COLLEGE SKILLS AND THE RISE IN THE COLLEGE WAGE PREMIUM

The college wage premium for new labor market entrants rose sharply during the 1980s. We ask how much of this change arose from changes in the skill level of the typical college graduate. We find that skills attained prior to college, as measured by standardized test scores and high school grades, had no effect on the change in the college wage premium for men. In contrast, the returns to math ability rose considerably for women; failing to account for math skills thus substantially overstates the growth in the female college wage premium. Skills acquired in college, as reflected in the distribution of students across majors, had important effects on the relative wages of men. The trend away from low-skill subjects such as education and toward high-skill subjects such as engineering accounts for one-fourth of the rise in the male college wage premium.