High School Graduation, Performance, and Wages

Using data from the Panel Study of Income Dynamics and a proprietary sample of semiskilled production workers, this paper investigates the reasons for the discontinuous increase in wages associated with graduation from high school. I find a discontinuous decrease in workers' propensities to quit or be absent. However, I do not find that high school graduates have a comparative advantage in production jobs requiring more training, nor in either sample is there a discontinuous increase in required training associated with the jobs held by high school graduates. The wage premium associated with graduation from high school appears to be procyclical: falling during slumps, periods in which employers are likely to be hoarding labor and in which quits and absences are least important to firms. There is also some evidence suggesting that prior quits have a larger effect on the wages of high school graduates than on the wages of high school dropouts.