The education premium for employment is well-known. Better educated individuals have lower rates of unemployment than people with lower levels of education (Allegretto and Lynch, 2010). Among regional economics researchers, it is also well-known that unemployment rates vary substantially across regions and cities (Elhorst, 1995). Regional industrial structure has been shown to affect many aspects of a region’s economic situation, including both the general unemployment rate and the education premium for employment (Layne, 2013). In recent years, researchers have expanded the consideration of factors influencing regional economic outcomes beyond what a region makes, i.e., industrial structure, to what a region does, i.e., occupational structure (Chrisinger et.al, 2012).

This study contributes to the growing body of research on the regional economic effects of occupations by investigating the role regional occupational structure plays in the known education premium for employment. The research answers two questions. First, does a region’s occupational structure affect a resident’s employment prospects beyond the effect of the person’s own characteristics? Second, does a region’s occupational structure moderate the effects of educational attainment on employment prospects? Is the positive relationship between educational attainment and the likelihood of being employed stronger or weaker depending on the occupational structure of a local economy?

To answer these questions, the study uses all of the Public Use Micro Areas (PUMA) available in the 2012 American Community Survey (ACS) Public Use Micro Sample (PUMS).  Regional occupational structure is measured along two dimensions: primary occupational concentration, i.e., the occupation in which a region is most concentrated as measured by traditional location quotients, and occupational diversity, i.e., the number of a region’s occupational concentrations. Educational attainment is measured in three categories: (1) less than a high school degree, (2) high school degree or some college, and (3) bachelor’s degree or higher. The study employs a two level logistic model wherein individuals are nested within regions and a person’s likelihood of being employed is allowed to vary randomly across regions. This model allows the research to simultaneously examine the different effects of individual level characteristics, such as educational attainment, and regional characteristics, such as occupational structure, on the likelihood of being employed.

This study shows that regional development policies and the occupational structures they produce have real consequences for employment growth generally and for the employment advantage of better educated workers.

References

Allegretto, S. and Lynch, D. 2010. “The Composition of the Unemployed and Long-Term Unemployed in Tough Labor Markets”. Monthly Labor Review. 133(10).

Chrisinger, C. K., Fowler, C. S., and Kleit, R. G. 2012. “Shared Skills: Occupational Clusters for Poverty Alleviation and Economic Development in the U.S.” Urban Studies.

Elhorst, J.P. 2003. “The Mystery of Regional Unemployment Differentials; A Survey of Theoretical and Empirical Explanations”. Journal of Economic Surveys 17(5).

Layne, C. 2013. “The Education Premium for Employment: Is it the Same Everywhere?” Presented at the American Sociological Association Annual Meeting. New York. August.