Higher Education Is Increasingly Valuable in the United States, Less So in France

June 19, 2017 9:00 AM

How much of an economic advantage is there to having a higher education in the United States versus France? A study of the latest data demonstrates that people with more education are better off in both countries, but in the last 20 years, higher education has become even more valuable in the United States, and less so in France.

That conclusion is reached via a comparison of the evolution of relative average wages by education level over the period going from 1990 to 2012 in the two countries. The evidence shows the wage premium associated with higher education—in short, the education premium—is greater in the United States than in France. Additionally, this education premium has been increasing in the United States over the last two decades, while it has been decreasing in France.

The evidence for this conclusion can be shown in three steps.

First, average real wages by education level in each country are compared (figure 1). In both countries, higher education is associated with a higher average wage. In 2012 in the United States, the average hourly real wage of a worker with an advanced degree was about $38, while it was about $16 for a worker with a high school diploma. Similarly, in 2012 in France, the average monthly real wage of a worker with an advanced degree was about €2,290, while it was about €1,550 for a worker with a high school diploma.

Figure 1 Real wages by education level, 1990–2012

Figure 1 Real wages by education level, 1990–2012

Second, average real wages for high school graduates are compared with those for workers with advanced and college degrees, and for workers with no diploma (figure 2). The data are normalized such that the high school graduate (red) line is always equal to 1. This comparison shows that wage disparities resulting from higher degrees are more important in the United States than in France. In 2012, the ratio of the average wage of a worker with an advanced degree to that of a high school graduate was about 2.4 in the United States, while this ratio was about 1.5 in France. In contrast, the ratio of the average wage of a worker with no degree to a high school graduate was about 0.7 in the United States, while this ratio was about 0.9 in France.

Figure 2 Wages relative to high school wages by education level, 1990–2012

Figure 2 Wages relative to high school wages by education level, 1990–2012

Third, the change in relative average wages over time is compared. The ratios comparing high school wages to other levels are now all normalized to 1 in 1990 (figure 3). The third takeaway is more interesting.

In France, the picture looks quite different. Although relative wages increased by 6 percent for college degrees, the gap in earning power between French workers with advanced degrees and high school graduates decreased by 6 percent between 1990 and 2012. In comparison, relative wages of workers with no degree increased by 16 percent between 1990 and 2012. While wage disparities across education levels were increasing in the United States, they were decreasing in France.

Figure 3 Evolution of relative wages by education level since 1990

Figure 3 Evolution of relative wages by education level since 1990

What explains this divergence between the United States and France? Two main factors are at work. At the bottom of the distribution, the US real minimum wage reached its lowest point in 50 years in 2007 (Autor et al. 2016), while the French real minimum wage increased rapidly—and at a more sustained pace than the national average wage—between 1997 and 2005. At the top of the distribution, data suggest that France has not experienced (or not to the same extent) the recent technological change—driven by firms like Google, Amazon, and Facebook—that favors skilled work as in the United States.

In conclusion, people with more education are better off in both countries, but in the last 20 years, higher education has become even more valuable in the United States, and less so in France.

References

Autor, David H., Alan Manning, and Christopher L. Smith. 2016. The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment. American Economic Journal: Applied Economics, 8(1): 58–99.