GED a distinct advantage for low-skilled white dropouts, study says

Low-skilled white high-school dropouts who pass the GED earn 10 to 19 percent more than those without the GED, according to a nationwide study of 80,000 people published in the spring Quarterly Journal of Economics.

PROVIDENCE, R.I. — When vying for jobs in the labor market, young, low-skilled white dropouts who have the General Educational Development (GED) credential do much better than those without the credential, according to a nationwide study led by a Brown economist.

A related study at the Harvard Graduate School of Education, completed by the same team of researchers, found no economic advantage to a GED among more highly skilled dropouts. For more information on those results, contact Christine Sanni at (617) 496-5873.

The study of 80,000 people, five years after taking the GED, found that white dropouts who narrowly passed the test earned at least 10 to 19 percent more than those who failed. There was no difference among minorities.

“The GED is an important avenue for very low-skilled dropouts to set themselves apart,” said John H. Tyler, assistant professor of education, economics and public policy at Brown. “It is a signal to the labor market to hire me or give me a better job.”

Employers use the GED as a signal of an applicant’s ability when evaluating a pool of low-skilled workers, according to Tyler, who completed the research with Richard J. Murnane and John B. Willett, professors of education at the Harvard Graduate School of Education.

They looked at men and women between the ages of 21 and 26, from 42 states, using data from the GED Testing Service, state departments of education and the Social Security Administration. Each year, more than 500,000 dropouts receive the GED.

In New England, for example, researchers found the mean for 1995 earnings among white dropouts was $9,727 for GED holders, compared to $8,273 for dropouts with comparable attributes who did not have a GED. (The earnings may appear low overall because people who earned nothing were averaged into the figures.)

The study took into account only the lowest-skilled dropouts – persons who had generally low scores on the GED. While the GED exam is the same nationwide, the passing standards vary from state-to-state. The research design used by Tyler and his colleagues compared dropouts who scored the same on the GED, but because they were from different states, some passed and some failed. After accounting for differences in earnings that might occur because the participants resided in different states, the authors attributed the earnings differences to the effect of the credential itself.

In general, young people who leave school with the lowest skills have gaps in their job histories that cause difficulty in getting hired. GED holders stand out to an employer screening a pool of applicants who otherwise have similar, spotty records, said Tyler. The likely reason is that the GED provides a signal that dropouts are mature and committed enough to complete a seven-hour set of examinations and have acquired at least a minimum set of cognitive skills.

The study breaks new ground by looking at a group of dropouts who have not been studied separately before, those with very low skills. Other research has examined all GED holders as a single group and generally found small and often statistically insignificant differences between the average outcomes of GED holders and dropouts who do not possess the credential.

Despite the earnings benefit for white dropouts, this study did not find any GED advantage among minorities. Researchers attribute that finding to the relatively high proportion of minority males in the study who earned the GED while incarcerated. Additional research must be done on minorities to pinpoint whether a potential prison “stigma effect” would be large enough to negate the GED effect, or whether the people studied remained in prison and were therefore unable to get jobs, Tyler said. Additional research could also determine whether there is a gender difference to the GED advantage.

The study was supported by the National Center for the Study of Adult Learning and Literacy (NCSALL), which is funded by the U.S. Department of Education’s Office of Educational Research and Improvement, and the Rockefeller, Russell Sage, Spencer, and Smith Richardson foundations. It is published in the spring edition of the Quarterly Journal of Economics.