ESRI Discussion Paper Series No.310
The Postgraduate Wage Premium: Estimating the Age-Wage Profiles Using 2007 Employment Status Survey

Hisanobu Kakizawa
Assistant Professor , Faculty of Commerce, Doshisha University
Tomotaka Hirao
Assistant Professor, Institute of Education and Student Support, Ehime University
Hisakazu Matsushige
Professor, Osaka School of International Public Policy,Osaka University
Izumi Yamasaki
Assistant Professor, Institute of Education and Student Support, Wakayama University
Tomohiko Inui
Professor, Preparatory Office for the Faculty of International Social Studies, Gakushuin University

Abstract

Many people have been skeptical about the economic value of going to graduate school in Japan. However, there are few empirical studies to analyze this issue. This paper estimates the private internal rate of return to postgraduate education and assesses the postgraduate wage premium in Japan. In particular, the study illustrates how much the payroll systems of companies and institutions favor postgraduate graduates over college graduates by analyzing the age-wage profiles of workers who continuously work for the same employers after they graduate.

The comparison of the age-wage profiles of college degree holders and postgraduate degree holders reveals that the lifetime wage income is higher among those with postgraduate degrees than among those who have college degrees both for males and females. The wages of postgraduate graduates continue to rise as they get older, which widens the wage gap with college graduates. The internal rates of return to master’s degrees are 11.4% for males and 10.1% for females, while the ones to Ph.Ds are 5.9% for males and 5.7% for females. The paper therefore shows the significant postgraduate wage premium over college graduates.

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