College Wages in the US and Global Labour Supply

November 2017

Abstract

Over the last 30 years, real hourly wages of workers in the US with high school and less education has been constant, or declining. In contrast, real wages of college graduates have increased at an average rate of 0.8 % per annum. The puzzle is the expanding college wage relative to other wages, especially the near constant high school wage.

This paper attempts an answer to both the puzzle of the college premium, and why this premium is declining. Global supply of college graduates, especially the supply of the rest of the world relative to the supply in advanced economies, has been expanding at a fast rate. This globalization phenomena helps explain the trend in US wages.