Tyler Cowen writes,

It is an embarrassing question for signaling models to ask: with what lag do employers get a good estimate of a worker’s marginal product? If you say “it takes 37 years” it is hard to account for all the recent changes in wage rates in response to technology, as discussed above.

Read the whole post.

More schooling can give you more skills. It can give you a signal of your ability (including your ability to conform). It also can give you membership in a cartel, to be a public school teacher, for example. I worry that it could be that growth in the cartel-membership value of schooling could account for some of the apparent long-term returns to schooling.

By the way, some of the studies that use instrumental variables to show a long-term return to schooling based on “natural experiments” are not persuasive. It turns out that if you look at the instruments, they are weak or questionable.