An empirical investigation into the effects of acquiring higher education at older ages on earnings growth and earnings profiles
Stemple, Richard J
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The perception male earnings profiles generally follow concave paths has persisted among economists from at least as early as the nineteen twenties. It has been partly based on the presupposition that schooling, to include college education, predominantly takes place while individuals are relatively young. The present study's general objectives are to empirically investigate over a broad age range whether and how obtaining college education at older ages affects men and women's concurrent earned income growth and to investigate how obtaining college education at older ages affects the behavior of earned income profiles. The study's major findings are first that participation in education to the extent of attending has no significant effect on men and women's concurrent earnings growth while controlling for time reallocation effects, a result contrary to the human capital theories of men and women's earned income behavior determination. Second, participation to the extent of receiving a degree does not significantly affect the earnings growth of men but it positively and significantly affects the earnings growth of women. Furthermore, the degree receipt effects experienced by women do not vary in a systematic fashion suggesting age neutrality in terms of women's ages at the time of degree receipt. In terms of earnings profile behavior, men's profiles are not affected by degree receipt whereas women's profiles are significantly and positively affected such that convexities may exist in women's profiles. In addition, time reallocation effects of time substitutions from other activities to paid employment participation further increase women's growth rates. This evidence supports the literature's findings that women's earnings profiles generally exhibit behavior representing something other than concavity. The evidence points to the existence of local convexities in earnings profiles of women who obtain college education to the extent of receiving a degree. In terms of household profiles with two working spouses present, convexities in women's profiles implies household profiles would also contain convexities. Such behavior offers an alternative explanation to the phenomenon of a positive relationship between household earned income and consumption over time, the close tracking of consumption with household income, the generally low levels of households' savings accompanied by high levels of household debt accumulation, and delayed initiation of retirement savings accumulation relatively later in the life of households.