From 1980 to 2000, the returns to a college degree increased dramatically compar

Question

From 1980 to 2000, the returns to a college degree increased dramatically compared to the returns to a high school degree, This question has you work through why this happens despite the fact that more students are going to college. a. The average real wage of high school graduates decreased but the supply of high school graduates decreased. what must have happened to the demand for high school graduates? b. The average teal wage of college graduates increased substantually despite the increases supply of college graduates what must have happened to the denund for college graduates? c. What explains these demand shifts?

Explanation / Answer

a. This can happen in the situation when the demand for high school graduates will fall more than the fall in the supply of the high school graduates.

b. The demand for college graduates should have increased more than the supply of the college graduates.

c. This can be explained by the rise in the share of high skill managerial and professional jobs rose from 21 per cent to 35 per cent. This required college graduates having specialized knowledge. Thus. the demand for college graduates rose and that of high school graduates fell.

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