EarningsDifferences2011A

EarningsDifferences2011A - Econ145. John Pencavel...

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Econ145.EarningsDifferences2011A John Pencavel DIFFERENCES IN EARNINGS AMONG PEOPLE Median Annual Earnings and Tax Payments in 2008 of Full-Time Year- Round Workers Aged 25 Years and Older by Highest Schooling Attainment (in Thousands of Dollars) schooling level before taxearnings taxespaid * after-taxearnings not a high school graduate 24.3 4.7 19.6 high school graduate 33.8 7.1 26.7 some college, no degree 39.7 8.7 31.0 associate degree 42.0 9.3 32.7 bachelor’s degree 55.7 13.0 42.7 master’s degree 67.3 16.2 51.1 doctoral degree 91.9 23.1 68.8 professional degree 100.0 25.6 74.4 * taxes paid include Federal income, state & local income, Social Security, Medicare, sales taxes, & property taxes ; data from U.S. Census Bureau 2009 and IRS http://trends.collegeboard.org/files/Education_Pays_2010.pdf Earnings means the sum of wage & salary income and self-employment income. Earnings constitute about 81% of aggregate income. There is a dispersion across individuals in these earnings by schooling. At each schooling level, consider the earnings at the 25 th percentile (Q 1 ) , at the 50 th percentile (M), and at the 75 th percentile (Q 3 ) and, as an indicator of dispersion form, D = (Q 3 - Q 1 ) ÷ M.
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2 Before Tax Annual Earnings (in Thousands of Dollars) in 2008 of Full-Time Year-Round Workers aged $ 25 Years, by Schooling and Gender WOMEN schooling level Q 1 MQ 3 D not a high school graduate 14.6 19.8 26.9 0.621 high school graduate 20.8 28.4 38.0 0.606 some college, no degree 24.3 32.6 46.0 0.666 associate degree 26.8 36.8 51.1 0.660 bachelor’s degree 33.9 47.0 65.5 0.672 master’s degree 45.1 57.5 79.3 0.595 doctoral degree 52.2 74.0 100.0 0.646 professional degree 51.1 71.3 120.0 0.966 MEN schooling level Q 1 3 D not a high school graduate 19.9 27.3 39.3 0.711 high school graduate 26.9 39.0 53.2 0.674 some college, no degree 31.3 45.8 65.4 0.745 associate degree 35.7 50.1 68.0 0.645 bachelor’s degree 43.8 65.8 96.8 0.805 master’s degree 54.3 81.0 115.0 0.749 doctoral degree 67.9 100.0 150.0 0.821 professional degree 71.5 125.0 200.0 1.028
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3 Would the positive association between earnings and schooling persist if the effects of other influences on earnings (that may well be correlated with schooling) were removed? What does the associated mean. ....that, if anyone at chosen at random were required to spend more time at school, her subsequent earnings would be greater than if she did not spend this time at school? Do more years at school cause higher earnings?
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4 A Reminder of Absolute and Relative Wage Differences Below suppose x and y are two sequences of wages. dollars jxy Δ x Δ y ln x ln y Δ ln x Δ ln y 1 5 5 1.61 1.61 2 10 7.5 5 2.5 2.30 2.01 0.69 0.40 3 15 11.25 5 3.75 2.71 2.42 0.41 0.41 4 20 16.88 5 5.63 3.00 2.83 0.29 0.41 5 25 25.31 5 8.44 3.22 3.23 0.22 0.40 6 30 37.97 5 12.66 3.40 3.64 0.18 0.41 7 35 56.96 5 18.99 3.56 4.04 0.16 0.40 8 40 85.44 5 28.48 3.69 4.45 0.13 0.41 The x sequence shows a constant absolute increase of $5: x j = 5 + x j - 1 . The y sequence shows a constant proportionate increase of 50%: y j = (1.5) y j - 1 . The absolute increases in x are given by the column Δ x and the absolute increases in y are given in the column Δ y . The absolute increases in y rise with y.
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EarningsDifferences2011A - Econ145. John Pencavel...

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