Association for Public Policy Analysis & Management

The education premium is increasing over time after 1980s in the United States but it increases at a slower pace recently. One explanation for this phenomenon is the decrease of the quality of workers who attended at least some college (college graduates) relative to the quality of workers who at most got high school diploma (high school graduates). This paper constructs worker quality to estimate the impact of college and high school graduates quality on both wages and the education premium. The measurement for worker quality uses a weighted average of occupational skill index. I link the occupational skill to the measurement of quality because the variance for college wages is increasing over time and is directly related to occupational choice. I find that a 1 percent increase in the quality of both high school and college graduates results in a 0.36 percent in the education premium. One evidence of the decline of the quality of college graduates comes from the increasing college enrollment over time. I find that a 1 percent increase in college enrollment leads to a decline in the quality of college graduates by 0.11 percent and has nearly no effect on the quality of high school graduates.