Education and Unemployment. Technical Paper No. 11.

A major benefit of education is the lower risk of unemployment at higher educational levels. Analysis of statistical data on the white male labor force drawn from the Panel Study of Income Dynamics (PSID) indicates that the reduction of the incidence of unemployment is far more important than the reduced duration of unemployment in creating educational differentials in unemployment rates. The lower unemployment incidence of the more educated workers is due equally to their greater attachment to the firms employing them and the lower risk of becoming unemployed when separated from the firm. The lower frequency of job turnover of more educated workers, which creates fewer episodes of unemployment, is in large part attributable to more on-the-job training. The following factors may explain the lower conditional unemployment of educated workers and the somewhat shorter duration of their unemployment: (1) more educated workers appear to search for new employment while already employed, which is less costly than searching for employment while unemployed; (2) more educated workers are more efficient in acquiring and processing job search information; and (3) firms and workers search more intensively to fill more skilled vacancies. Statistical data on seven tables are included. Discussions of two of the equations used in the analysis and a list of 24 references are appended. (FMW)