Shortcut: High School Grades As a Signal of Human Capital

Abstract

Research shows that employers are dissatisfied with their ability to hire good workers out of high school (Barton, 1990; Cappelli & Rogovsky, 1993). This article considers whether employers could benefit from using high school grades to identify workers whom they will value more in the long run. Using the High School and Beyond data on the sophomore cohort, this article examines the effects of high school grades on long-term productivity as measured by earnings. It finds that high school grades do have a strong and significant effect on earnings 9 years after high school for both men and women, those with and without bachelor’s degrees, and controlling for race/ethnicity, SES, region of the country, and whether the school is public or private. Using a fixed-effect model, it also demonstrates that these findings are robust even after controlling for school-level differences. The article further confirms other researchers’ findings of no or negative short-term effects of high school grades on earnings. It argues that this connection between grades and long-run productivity suggests that employers could use high school graduates’ grades to identify workers they will value.