The Labor Market Returns to Reversing High School Dropout

Abstract

More than 18 million adults in the United States have no high school credential. The GED is a common remedy but has low returns. Full diplomas for adults might provide an alternative but are often discouraged by public policy. This paper estimates the labor market return to a high school diploma for adults who dropped out of traditional high school. We compare outcome trends for people who graduate from a network of adult high schools to those who apply but do not enroll. Over 5 years, earnings increase by 39% more for graduates, closing about half of the earnings gap between high school graduates and non-graduates. We address selection into graduation by conditioning on 5 years of pre-application earnings trends, comparing to enrolled students who exit due to positive shocks, and using variation in graduation from assignment to remedial coursework. Earnings gains occur alongside increased credentialing and switches from hospitality and temporary jobs to healthcare, which both suggest that human capital accumulation is an important mechanism.

Keywords: high school dropout, high school diploma, returns to education, human capital, GED

JEL Classification: I24, I26, J24