Postgraduate Education and Labor Market Outcomes: An Empirical Analysis Using Micro Data from Japan

• Published date: 01 July 2015
• Date: 01 July 2015
• DOI: http://doi.org/10.1111/irel.12100

Postgraduate Education and Labor Market

Outcomes: An Empirical Analysis Using Micro

Data from Japan*

MASAYUKI MORIKAWA

Using a large micro dataset from Japan, this paper provides evidence on the rela-

tionship between postgraduate education and labor-market outcomes. According

to the analysis, the key findings include: (1) The employment-to-population rates

of females and elderly people with postgraduate educations are higher than those

with undergraduate educations. (2) The postgraduate wage premium relative to

undergraduates is approximately 30–40 percent, which is similar in magnitude for

male and female workers. (3) The wage reduction after age 60 is less for workers

with a postgraduate education. (4) The private rate of return to postgraduate

education exceeds 10 percent.

Introduction

In advanced countries, the number of people with postgraduate degrees is

increasing rapidly. These highly educated workers are important contributors

to innovation and economic growth. Considering the trend toward a knowl-

edge-based economy, the effect of investments in advanced education, espe-

cially postgraduate education, on human capital productivity is an important

policy interest. In Japan, the numbers of new postgraduates with master’s

(MA) and doctor of philosophy (Ph.D.) degrees who obtained jobs in 2012

were 57,431 and 10,868, respectively (Table 1), an increase of 3.5 percent per

annum over the last decade. The growth rate is higher than the comparable fig-

ure for undergraduates (1.2 percent per annum).

1

At the stock level, the share

*The author’saffiliation is Research Institute of Economy, Trade and Industry (RIETI), Tokyo, Japan.

Email: morikawa-masayuki@rieti.go.jp

JEL: J21, J24, J31.

The author thanks Reiko Aoki, Masahisa Fujita, Arata Ito, Minoru Kaneko, Yohei Kobayashi, Atsushi

Nakajima, Keiichiro Oda, Willem Thorbecke, Toru Ueno, Munehisa Yamashiro, Isamu Yamauchi, and the

seminar participants at RIETI for their valuable comments and suggestions. Two anonymous reviewers pro-

vided many suggestions that have greatly improved this article.

1

The School Basic Survey, conducted annually by the Ministry of Education, Culture, Sports, Science

and Technology (2012).

INDUSTRIAL RELATIONS, Vol. 54, No. 3 (July 2015). ©2015 Regents of the University of California

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499

of workers with postgraduate educations to the total number of workers is only

2.2 percent in 2007, but this share is higher for younger cohorts.

2

For exam-

ple, among workers aged 25 to 39, the share of workers with postgraduate

educations to the total number of workers is 3.3 percent and the share to those

with a bachelor (BA) degree or higher exceeds 10 percent (Table 2).

Workers with postgraduate education are important contributors to innova-

tion. Approximately 64 percent of postgraduates study natural sciences, includ-

ing science, engineering, agriculture, and medical science (Ministry of

Education, Culture, Sports, Science and Technology 2012). A large number of

postgraduates obtain jobs in manufacturing, information and communications,

professional and technical services, and medical service industries: industries

characterized by rapid technological progress. By occupation, professional and

engineering jobs are the dominant occupations for people holding postgraduate

degrees.

3

According to the Inventor Survey, conducted by the Research Insti-

tute of Economy, Trade and Industry (RIETI), 28.6 percent of the important

patents and 12.9 percent of the triadic patents (patents filed in Japan and

Europe and granted by the U.S. Patent and Trademark Office) are produced by

Ph.D. holders (Nagaoka 2010; Nagaoka and Tsukada 2007). Although these

figures are lower than the comparable figures in the United States and Europe,

we should keep in mind that the absolute number of Ph.D. holders in Japan is

small. Jones (2009, 2010) stated that the educational burden on recent cohorts

of innovators has increased due to the increase in the stock of knowledge, and

that the age at first invention has been increasing over time. To produce cut-

ting-edge innovations today, a significant investment in higher education is

essential.

TABLE 1

THE NUMBER OFNEW POSTGRADUATES WHO OBTAINED JOBS

(1) Bachelor’s (2) Master’s (3) Doctoral

2001 312,450 39,496 (11.0%) 7454 (2.1%)

[40.0%] [19.2%] [19.2%]

2012 357,011 57,431 (13.5%) 10,868 (2.6%)

[48.6%] [23.8%] [24.9%]

Annual growth 1.2% 3.5% 3.5%

NOTE: The figures in parentheses indicate the shares to the total number of bachelor degree or higher. The figures in brack-

ets are the female ratios.

SOURCE: The School Basic Survey (Ministry of Education, Culture, Sports, Science and Technology 2012).

2

The Employment Status Survey (Ministry of Internal Affairs and Communications 2007).

3

A relatively large number of Ph.D. graduates obtain jobs in the education service sector, indicating that

these people are working as professors or teachers.

500 / MASAYUKI MORIKAWA