A Deeper Look at the Effect of High School Choice on Wages

Tuesday’s blog post examined various relationships among high school characteristics, school type and wages. However, this surface analysis did not control for several other factors that can influence wages as well. Today’s post shows the results after accounting for such factors and is again based on work from Assistant Vice President and Economist Michael Owyang and former Senior Research Associate E. Katarina Vermann, both with the Federal Reserve Bank of St. Louis.

As covered in Tuesday’s post, a simple analysis of data from the National Education Longitudinal Study of the effect of school choice on future earnings showed that:

• Students who attended private and Catholic schools earned 13.1 percent and 13.9 percent more, respectively, than those who attended public schools.
• Students who attended urban and rural schools earned 5.3 percent and 10.8 percent less, respectively, than those who attended suburban schools.
• Students from schools with the lowest dropout rates and lowest percentage of students in remedial courses earned 11.8 percent and 0.7 percent more, respectively, than those attending schools with average rates.

Other Influencing Factors

Controlling for other factors such as race, sex and socioeconomic status as well as industry of employment and occupation yielded different results. Owyang and Vermann found that private high school graduates earned just 2.6 percent more than their public school counterparts, and the results were not statistically significant. Catholic high school graduates, on the other hand, earned a statistically significant 13.6 percent wage premium over public high school graduates. The authors noted, “This result could indicate that there are significant differences in unquantifiable aspects of school quality that could affect earnings later in life.”

Owyang and Vermann also found that most of the other factors originally studied—school geography (rural, urban, etc.), dropout rates and percentage of students in remedial courses—were not significantly related to wages. Graduates of schools with higher base salaries for teachers, however, experienced a 2.3 percent increase in earnings. The authors wrote, “Thus, investing in high-quality teachers appears to have an economic return for students regardless of school type.”

Indirect Effects

The authors noted that their results suggest that the type of school one attends does not always translate directly to a change in future wages. However, there could also be indirect effects.

Owyang and Vermann estimated the relationship among high school type, college enrollment and completion of a four-year college and found that:

• Graduates of private and Catholic high schools were 6.2 percent and 6.5 percent more likely, respectively, to enroll in higher education than public high school graduates.
• Students who attended private and Catholic high schools were 19.7 percent and 15.8 percent more likely, respectively, to earn bachelor’s degrees than public high school graduates.
• Students who attended high schools with higher teacher base salaries were 0.8 percent more likely to enroll in college and 1.4 percent more likely to earn a bachelor’s degree.
• Students from schools with higher percentages of students in remedial courses were 0.3 percent less likely to earn a bachelor’s degree, but were marginally less likely to enroll in higher education.
• There was no significant relationship between a school’s dropout rate or school location and a student’s secondary college enrollment or achievement.

Conclusion

Owyang and Vermann concluded by noting that while there appear to be long-run economic benefits from attending parochial or private high schools, these results didn’t come from a random sample. Students at these schools may have traits that contribute to their academic and economic achievement, meaning they may be students who are more likely to succeed regardless of where they were educated.

The authors wrote, “As a result, the returns to the type of high school a student attends may be a better indicator of a student’s ability or family finances rather than the school’s effect. This issue provides evidence for the match-quality measure of school type, assuming individuals who choose the school in which they enroll are selecting the school based on unquantifiable aspects of fit, such as values. As a parent, what matters may be simply focusing on a child’s education regardless of the school a child attends.”

Additional Resources

• Regional Economist: Measuring the Effect of School Choice on Economic Outcomes
• On the Economy: The Great Recession Casts a Long Shadow on Family Finances
• On the Economy: Should We Be Concerned about the Economic Impact of Immigration on Native U.S. Labor?