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In this chapter the authors look at the transition from school to work in the United States of America (USA) from a human capital theory perspective. Human capital theory approaches educational stratification from the point of view of investment and returns: young people invest in themselves and their futures by enrolling in education and receive the return on this investment in the labour market. The authors contend that as long as the realities of educational differentiation are not obscured, an investment approach can provide researchers with objective criteria for choosing a basis for their comparisons. Further, the investment perspective makes more sense in the USA than it might elsewhere since in the USA education is undertaken by individuals and there are few institutional ties between educational institutions and employers and unions and few attempts to match the skills taught to the needs of employers. It is suggested that because of the absence of these stable institutional linkages students graduate with little knowledge of the needs of prospective employers, making initial labour market experiences of young adults unstable.