Media Briefings


  • Published Date: March 2018

Educated Americans typically experience lower rates of unemployment than their less educated peers – not because they find jobs faster but because they are substantially less likely to part company with their employers. People with higher levels of education tend to receive more on-the-job training and thus accumulate more human capital, which makes it costlier to end an employment relationship.

These are the central conclusions of research by Isabel Cairó and Tomaz Cajner, published in the March 2018 issue of the Economic Journal.

The researchers analyse the past 40 years of labour market data for the United States. Their analysis shows that different education groups face roughly the same probability of finding a job – and thus roughly similar lengths of time in unemployment.

But the probability of losing a job in the United States varies dramatically by educational level. For example, on average, people with only a high school education face a probability of losing their job that is twice as high as for college graduates – which in turns translates into unemployment rates that are twice as high.

The data also confirm overwhelmingly that more educated workers in the United States receive more on-the-job training, as measured both by training duration and the productivity increase due to training.

Economic theory suggests that higher amounts of accumulated human capital that can be lost when a job disappears should reduce the incentives for both firms and workers to separate. Using a standard theoretical model of the labour market, the researchers show that this mechanism can indeed explain the gap in educational unemployment rates. Investments in human capital reduce incentives to separate but leave the job finding rate essentially unaffected.

To validate these findings further, the researchers examine detailed occupational data on unemployment rates, the probability of finding a job and the probability of losing a job.

These data confirm that highly educated workers are typically employed in occupations that require higher levels of training and that workers in these occupations experience substantially lower unemployment rates due to the lower probability of losing a job. Strikingly, even for workers with the same educational attainment, higher levels of training lead to noticeably lower unemployment rates.

The researchers also evaluate several alternative explanations for why unemployment rates might differ by education. For example, it might be that more educated individuals work in jobs that are more profitable and thus more costly to end. Or it might be that hiring more educated individuals requires higher hiring costs, which again makes it costly to separate from these workers.

It is also possible that the jobs of less educated workers are subject to either more frequent or more adverse shocks.

But the standard theoretical model of the labour market coupled with available empirical evidence gives little importance to these alternative hypotheses.


Notes for editors: ‘Human Capital and Unemployment Dynamics: Why More Educated Workers Enjoy Greater Employment Stability’ by Isabel Cairó and Tomaz Cajner is published in the March 2018 issue of the Economic Journal.

Isabel Cairó and Tomaz Cajner are at the Federal Reserve Board.

For further information: contact Romesh Vaitilingam on +44-7768-661095 (email:; Twitter: @econromesh); or Tomaz Cajner via email: