Meet the Author

Dionissi Aliprantis |

Research Economist

Dionissi Aliprantis

Dionissi Aliprantis is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in applied econometrics, labor and urban economics, and education. His current work investigates neighborhood effects on education and labor market outcomes.

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Meet the Author

Mary Zenker |

Research Analyst

Mary Zenker

Mary Zenker is a former research analyst in the Research Department at the Federal Reserve Bank of Cleveland.

09.14.11

Economic Trends

Recent Changes in the Relationship between Education and Male Labor Market Outcomes

Dionissi Aliprantis and Mary Zenker

There is reason to believe that educational attainment is one of the key determinants of outcomes in the labor market. For example, people who graduate high school are more often unemployed on average than those who get a college degree, and a smaller proportion of high school graduates joins the workforce. These labor market outcomes have been highly correlated with educational attainment over the last 20 years (as we showed in a recent article).

As a result, social scientists have devoted considerable attention to understanding the relationship between educational attainment and labor market outcomes. A key finding has been that this relationship has changed in recent decades. In particular, there has been a well-documented increase in the wage premium for educational attainment: The more education one now obtains, the more one tends to earn.

Much of the work that has been done to understand the relationship between educational attainment and labor market outcomes has focused on individuals. But it is important to look at neighborhoods as well because the characteristics of a given neighborhood may influence the outcomes of the individuals who live there.

We examined decennial census data to study trends in educational attainment and labor market outcomes at the neighborhood level. Data on education and labor market outcomes are available at the level of the census tract from the National Historical Geographic Information System (NHGIS). Census tracts are often used to define neighborhoods because they typically have around 4,000 residents and are delineated so that each contains a relatively homogeneous population.

The data indicate a number of major changes for men between 1970 and 2000. First of all, male labor force participation (LFP) rates fell in neighborhoods at every level of educational attainment. One pattern that remained the same is that male LFP rates were higher in neighborhoods with higher educational attainment.

Another change we observe at the neighborhood level from 1970 to 2000 is the relationship between LFP and high school graduation rates. In 1970, male LFP increased as one moved from neighborhoods with the lowest high school graduation rates (15 percent–30 percent) to neighborhoods with slightly higher graduation rates. By 2000 this had changed. Moving from neighborhoods with the lowest high school graduation rates (now 35 percent) to neighborhoods with higher graduation rates, we see no increase in the average male labor force participation rate. Only at high school graduation rates of 60 percent or higher do we see the expected rise in male LFP.

Unemployment increased for men at all levels of educational attainment between 1970 and 2000, and this increase was felt most strongly at lower levels of attainment. In neighborhoods where more than 10 percent of the residents have earned a bachelor’s degree (BA), the increase in unemployment from 1970 to 2000 is fairly constant. But in neighborhoods where less than 10 percent of the residents have a BA, the difference in average male unemployment over the period is much greater. For example, in neighborhoods where 30 percent of residents hold BAs, male unemployment rose 1.9 percent between 1970 and 2000. But for neighborhoods where 5 percent of residents held BAs, this change was 8.0 percent. These differences continue to grow in neighborhoods with decreasing BA attainment rates.

Neighborhood high school graduation rates are also predictive of the increase in unemployment between 1970 and 2000. In neighborhoods in which nearly all adults graduated from high school, there were only modest increases in unemployment rates between these years. However, as we look at neighborhoods with lower and lower high school graduation rates, we see the increase in the average male unemployment rate between 1970 and 2000 was larger and larger. For example, between 1970 and 2000, average male unemployment increased by 1.7 percentage points in neighborhoods with a high school graduation rate of 90 percent. This increase was 7.7 percent in neighborhoods with a high school graduation rate of 60 percent.

Overall, the data we have considered suggest that in recent decades educational attainment has become more important in determining labor market outcomes at the neighborhood level.