E C O N O M I C R E P O R T O F T H E P R E S I D E N T

diploma (Chart 4-5). That same year the median earnings of male collegegraduates were 57 percent higher than those of high school dropouts. Otherevidence suggests that these ratios had been roughly constant or even decliningslightly in the decade prior to 1979. By 1999 college graduates were earning68 percent more per week (again measured at the median) than highschool graduates, and 147 percent more than those who had not completedhigh school. Since the mid-1990s the returns to lower levels of educationhave increased at about the same rate as returns to college education, implyingthat the gap is little changed. Overall, this evidence suggests that therehas been rapid growth in the demand for skills over the past two decades,because the premium associated with a college education has gone up even asthe supply of college graduates has increased.Providing further support for the rising importance of skills is evidence that,even within education groups, the rates of return to cognitive skills (reading andmath skills, for example) may have increased in recent decades. Research hasused longitudinal surveys to examine what impact a person’s level of basic mathand reading skills, as measured by scores on cognitive tests administered in highschool, have on that person’s wages after graduation. Results from a sample ofhigh school graduates who did not go on to college indicate not only that agreater mastery of basic skills translates into higher wages, but also that this relationshiphas grown stronger over recent years. The implication is that basic skillsare more important in the labor market than in the past. The same data alsoallow us to address the question of whether the educational wage premium136 | Economic Report of the President