The returns to migration and human capital accumulation pathways: non-metropolitan youth in the school-to-work transition

Abstract

The school-to-work transition comprises a critical period of human capital development for young people. As school-to-work pathways become increasingly diverse and complex, there is growing evidence that transitions during this period significantly influence individual career trajectories and long-term earning capacities. For non-metropolitan youth, this period of the life course often involves migration to urban centres in the search for better educational and employment opportunities. Drawing on longitudinal data, this paper examines the influence of migration and school-to-work pathways on entry-level wages for non-metropolitan youth in Australia. Our results highlight that migration from non-metropolitan communities to urban centres leads to higher entry-level wages, but these wage gains are not immediate, rather they are realised at a period 3 years post-migration. Individuals remaining in non-metropolitan communities were found to experience pathways that lead to lower wage returns. Furthermore, unobserved attributes, such as motivation and aspirations, were found to be a major factor explaining the higher wage returns achieved by non-metropolitan migrants. Findings have important consequences for policy in their potential to contribute to new evidenced-based policy designed to entice the return of young people to non-metropolitan communities and ameliorate the long-standing net loss of young population from regional areas.

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Notes

  1. 1.

    The sequence analysis was performed by using the R software Package TraMineR developed by Gabadino et al. (2011).

  2. 2.

    Medoids are representative objects of a data set whose average dissimilarity to all the objects in a cluster is minimal.

  3. 3.

    The decomposition of the quantile differences was performed by using a user-written Stata command, cdeco, available at: http://www.econ.brown.edu/fac/Blaise_Melly/code_counter.html.

  4. 4.

    It is important to note that our data comprise nominal wages. This wage growth may thus reflect differences in living costs between metropolitan and non-metropolitan areas, rather than a real increase in wages. Lack of spatial data on living cost covering the Australian territory prevents exploring changes in real wages. However, a 2006 study by Australia’s Bureau of Infrastructure, Transport and Regional Economics (BITRE 2008a, b) indicate that while major cities tend to have higher living costs than regional cities and towns, living costs are much higher in remote areas and coastal towns. Although these spatial relativities may have changed, the evidence suggests that the rise in median wage experienced by non-metropolitan migrants cannot be entirely explained by living cost differentials. This is particularly for those moving from non-metropolitan areas such as Broome, Moyne and Nhulunbuy, which display living costs of up to 30 % higher than major cities (BITRE 2008a, b).

  5. 5.

    Coefficients for the employment occupation of parents produced similar results, but they were excluded because of collinearity with parental education variables.

  6. 6.

    The industry in which individuals work may consider to be an endogenous choice as salary expectations may influence the decision to work in a particular industry. However, endogeneity does not seem to be a concern in our analysis. We perform regressions robust to endogeneity by using 2012 industry sector data (i.e. the preceding year to which wages are measured). They show little changes in relation to those reported in Appendix Table 5.

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Correspondence to Francisco Rowe.

Appendix

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Table 5 Quantile median regression coefficients

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Rowe, F., Corcoran, J. & Bell, M. The returns to migration and human capital accumulation pathways: non-metropolitan youth in the school-to-work transition. Ann Reg Sci 59, 819–845 (2017). https://doi.org/10.1007/s00168-016-0771-8

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