Should We Teach Old Dogs New Tricks? The Impact of Community College Retraining on Older Displaced Workers

Abstract

This paper estimates the returns to retraining for older displaced workers--those 35 or older--by estimating the impact that community college schooling has on their subsequent earnings. Our analysis relies on longitudinal administrative data covering workers who were displaced from jobs in Washington State during the first half of the 1990s and who subsequently remained attached to the state's work force. Our database contains displaced workers' quarterly earnings records covering 14 years matched to the records of 25 of the state's community colleges.We find that older displaced workers participate in community college schooling at significantly lower rates than younger displaced workers. However, among those who participate in retraining, the per-period impact for older and younger displaced workers is similar. We estimate that one academic year of such schooling increases the long-term earnings by about 8 percent for older males and by about 10 percent for older females. These per-period impacts are in line with those reported in the schooling literature.These percentages do not necessarily imply that retraining older workers is a sound social investment. We find that the social internal rates of return from investments in older displaced workers' retraining are less than for younger displaced workers and likely less than those reported for schooling of children. However, our internal rate of return estimates are very sensitive to how we measure the opportunity cost of retraining. If we assume that these opportunity costs are zero, the internal rate of return from retraining older displaced workers is about 11 percent. By contrast, if we rely on our estimates of the opportunity cost of retraining, the internal rate of return may be less than 2 percent for older men and as low as 4 percent for older women.

Flexibility at a cost – Should governments stimulate tertiary education for adults?

“…Figure 3 most for males, is a pattern that has been observed in both the US and Sweden (e.g., Jacobson et al 2003, p80, Stenberg 2011, and it accentuates the importance of analyzing long time-series.…”

“…For education among older individuals, Jacobson, Lalonde and Sullivan (2003, 2005a, 2005b study workers aged 25 to 59 who were laid-off between 1990 and 1994 in Washington State, 15 percent of whom registered at community colleges. Individual fixed effects estimates of quarterly earnings from 1987 to 2000 indicate that a year of studies increased earnings by 7 to 9 percent for males and by 10 to 13 percent for females.…”

Does Formal Education for Older Workers Increase Earnings? — Evidence Based on Rich Data and Long‐term Follow‐up

“…In a series of papers, Jacobson et al . (, 2005a, 2005b) analysed the proportional returns to community college schooling among laid‐off workers in Washington State. Jacobson et al .…”

“…Earlier studies of formal education for older adults have reported positive earnings effects, although based on highly selected samples. In a series of papers, Jacobson et al (2003Jacobson et al ( , 2005aJacobson et al ( , 2005b analysed the proportional returns to community college schooling among laid-off workers in Washington State. Jacobson et al (2005a) reported an earnings return of roughly 10 per cent to a year of studies, and no significant differences between samples aged 22-35 and 36-59 at the time of job loss.…”

The long-term earnings consequences of general vs. specific training of the unemployed

“…However, in the long run, if general skills increase the ability to learn new tasks, this could make workers less sensitive to changes in the demand for skills. Earlier studies of adults in general education have reported average earnings returns which still increase eight to ten years after enrolment (Jacobson et al 2003, Stenberg 2011. As program effects vary between individuals and over time, these estimates are not directly comparable with evaluations of vocational training programs, but they raise the question of whether the long-term effects of general training would catch up with or exceed the earnings effects of specific training.…”