Earnings and the decision to return to school

This paper finds that a significant predictor of returning to school is earnings below expected earnings in the National Longitudinal Survey (NLS) Young Men sample. These 'unlucky' workers find that the foregone cost of schooling was lower than they thought. At the same time, the low relative earnings of these ‘unlucky’ workers may cause them also to revise their expected value of further schooling. But because they do actually decide to return to school, two interpretations of this revision in the value in further schooling are possible. Either the revision is upward, indicating that they believe that additional schooling will bring earnings up to that expected for persons with further education; or the revision is downward, but that revision must be dominated by a greater reduction in the expected cost of schooling for an economically sensible decision to return to school.