Unemployment by Education Level

8/14/2019 Unemployment by Education Level

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The Impact of Education Policy on Wage Structure

in Taiwan: Do College Graduates Really Earn Less

in Nowadays?

Chichun Fang

School of Labor and Employment Relations

University of Illinois

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1Tuesday, February 3, 2009


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Expansion of High Education System

Number of universities and colleges increased from 50 to 145.

1991: 21 universities, 29 colleges, and 73 professional colleges.

2004: 75 universities, 70 colleges, and 14 professional colleges.

What is the impact of such change in supply of college graduates?

Conventional wisdom says, price increases when quantity increases.

Are college students in Taiwan really facing worsening employment

outcomes, such as higher unemployment rates and lower wages?

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Population by Education Level

(2003)

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Population by Education Level

(2003, Younger than 30 only)

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Population with Diploma (By Thousands)

(1) Prof. H.S.

(2) Prof. Coll.

(3) Univ.

(2)+(3)

1994 3,534 1,522 1,305 2,827

2004 4,127 2,305 2,708 5,014

Change 593 783 1,493 2,277

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How Does Increasing in Colleges Change

Employment Outcome?

Two Questions:

Are college graduates more likely to be unemployed?

Are college graduates earning less in recent years?

I will look at unemployment rate first and then wages.

Data: Human Resource Survey in Taiwan, 2003 and 2006.

This study is at its preliminary stage. Comments are welcome, but please do

not knock too hard...

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Number of People Unemployed (By Thousands)

(1) Prof. H.S.

(2) Prof. Coll.

(3) Univ.

(2)+(3)

1994 52 26 21 46

2004 142 70 66 136

Change 90 44 45 90

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Unemployment Rate

(1) Prof. H.S.

(2) Prof. Coll.

(3) Univ.

(2)+(3)

1994 2.29% 2.35% 2.52% 2.42%

2004 4.98% 4.02% 4.11% 4.06%

Change 2.69% 1.71% 1.59% 1.64%

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Unemployment by Gender

(1978 through 2004)

.01

.02

.03

.04

.05

.06

1980 1985 1990 1995 2000 2005Year

Male Female

Unemployment Rate by Year and Gender

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Unemployment by Education

(1978 through 2004)

0

.02

.04

.06

1980 1985 1990 1995 2000 2005Year

Elementary School Junior High

Senior High Vocational High

Vocational College University

Unemployment Rate by Year and Education

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Unemployment by Education

(2003)

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Wage Distribution and Wage Determinants

How much do people across different education levels earn?

How much does education matter?

How much does gender matter?

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Wage Determinants

Gender. Male earn 24.5% more than female in the whole sample, everything

else being equal. However, the wage gap shrinks to 13% if only people

younger than 30 are included in the analysis.

Education. Generally, more education means higher wage, although there are

alternative explanations to this.

Impact of education is smaller among young people. (Why?)

Age. Returns to age (the wage premium you get by being one year older)varies between 8% in high wage jobs and 15% in low wage jobs.

Where you live does not matter, everything else being equal.

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Mean Income by Education

(2003)

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Median Income by Education

(2003)

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Evidences from Wage Distribution

Relative wages of old versus younger cohorts do not vary much across

education levels. This is not consistent with over-supply argument.

Younger cohort do earn less, but mostly because they are younger (and

hence less experience and job tenure).

Can further look at the change in conditional distribution. (DiNardo-Fortine-

Lemieux Variance Decomposition)

Basic idea: wage distribution can be influenced by many factors. Is ispossible to estimate the effects of each single factor?

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DFL Variance Decomposition,

with Demographics and Job Characteristics

0

.2

.4

.6

.8

1

Density

0 5 10 15Log Monthly Income in 2006 NTD

2003 Weighted 2003

0

.2

.4

.6

.8

1

Density


2006 Weighted 2003

-.0

4

-.0

2

0

.02

.04

.06

Difference

inD

ensities


DFL Decomposition: Adding Demographics

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DFL Variance Decomposition

Adding Education

0

.2

.4

.6

.8

1

Density


2003 Weighted 2003

0

.2

.4

.6

.8

1

Density


2006 Weighted 2003

-.0

4

-.0

2

0

.0

2

.04

.06

Difference

inD

ensities


DFL Decomposition: Adding Education

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Conclusion

Totally different from what you have read on newspapers.

Unemployment rate for college graduates does increase, but not as much as

people with other education levels.

Younger college students earn less because... they are younger.

But there still is a big puzzle: Why does mean starting salary for college

graduates decrease in recent years?

How do you think?

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Documents

Unemployment by Education Level