Wage rates and earnings give misleading signals to public and private policymakers as to the benefits of certain kinds of education and training investments. These misleading signals result from the fact that (1) workers and employers prefer employment contracts that either do not recognize or only partially recognize differences in productivity among workers doing the same job and (2) important dimensions of education and training accomplishment are often not signaled to potential employers and therefore have limited influence on the allocation of workers to jobs. Consequently, there are significant productivity differentials between workers receiving the same pay for the same job, and some of these are related to educational and training achievements that are not efficiently signalled. In light of these findings, policymakers in the education and training sectors should learn to generate better signals of the learning that occurs in school or on the job on the assumption that if employers have access to information on the competency that job applicants have developed in school they will use it. The second response to the problem should be to restructure the system of rewards and recognition in high schools. (An appendix to this report describes the data collection measures and sample population on which the study's conclusions are based.) (MN)