Where have All the Educated Workers Gone? Services and Wage Inequality in Three Asian Economies

Abstract

The wage returns to college have risen relative to those to secondary education in many developing economies. In India, the Philippines and Thailand, this is related to the expansion of services employment. We show this using decompositions connecting shifts in the returns to education to changing job opportunities. High-skill services employment grew slowly while relative demand in the sector shifted from secondary to college graduates, pushing workers with secondary education into low-skill intensive services. These polarizing trends in services employment account for the growing convexity of the Mincerian wage profile, and may constrain governments seeking to use educational expansion to alter the wage distribution.