Changes in the returns to education at entry into the labour market in West Germany

Abstract

This article studies to what extent societal processes such as educational expansion, economic modernisation and business cycles have affected the returns to educational certificates of women and men entering the labour market in West Germany. Using longitudinal data, long-term changes in cohort- and period-specific effects on socio-economic status attainment at entry into the labour market are investigated between 1945 and 2008. Analyses demonstrate that the entrants’ average socio-economic prestige scores have clearly risen in the process of modernisation. Despite educational expansion, increasing skill demands for highly qualified graduates resulted in rising rates of returns for the most highly educated entrants across birth cohorts. While educational expansion and economic modernisation have boosted socio-economic returns at entry into the labour market for women from all educational levels, it has not been the case for men with the lowest levels of education. Both educational expansion and rising skill requirements of occupations led to an increasing polarisation of inequality between tertiary educated labour-market entrants and less-qualified school leavers. Educational expansion in West Germany has therefore never exceeded the occupational skill demands at entry into the labour market.