Rising Wage Inequality and Postgraduate Education
Joanne Lindley
University of Surrey
Stephen Machin
University College London,
CEP and IZA
Discussion Paper No. 5981
September 2011
IZA
P.O. Box 7240
53072 Bonn
Germany
ABSTRACT
Rising Wage Inequality and Postgraduate Education*
This paper considers what has hitherto been a relatively neglected subject in the wage
inequality literature, albeit one that has been becoming more important over time, namely the
role played by increases in postgraduate education. We document increases in the number
of workers with a postgraduate qualification in the United States and Great Britain. We also
show their relative wages have risen over time as compared to all workers and more
specifically to graduates with only a college degree. Consideration of shifts in demand and
supply shows postgraduates and college only workers to be imperfect substitutes in
production and that there have been trend increases over time in the relative demand for
postgraduate vis-à-vis college only workers. These relative demand shifts are significantly
correlated with technical change as measured by changes in industry computer usage and
investment. Moreover, the skills sets possessed by postgraduates and the occupations in
which they are employed are significantly different to those of college only graduates. Over
the longer term period when computers have massively diffused into workplaces, it turns out
that the principal beneficiaries of this computer revolution has not been all graduates, but
those more skilled workers who have a postgraduate qualification. This has been an
important driver of rising wage inequality amongst graduates over time.
JEL Classification: J24, J31
Keywords: wage inequality, postgraduate education, computers
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