Inequality and Education

Much ink has been spilled on the crisis in American education and the contribution of a technological skills gap to growing inequality.  But, on closer examination, the arguments here are pretty weak.

First, despite all the handwringing about our underprepared workforce, the returns on education are not that clear.  While those with some college education or better pulled away from the pack in the 1980s and 1990s, that advantage has slowed dramatically.  The earnings trajectory of Iowans completing college has flattened: the median wage was $22.45 in 1999; it is about a dollar less today.  Indeed, as John Schmidt and Janelle Jones have pointed out, workers with some college education or a college degree are much more likely now to remain mired in low-wage work than workers with the same educational background a generation ago.  The last fifteen years have seen significantly slower growth in high-skill, high-wage jobs than in the economy at large.  Even those with the right skills are pounding the pavement.

Second, as Dean Baker and others have pointed out, the evidence linking a skills gap with rising inequality is weak with respect to the timing and the nature of that inequality.  Technological change is not new to the last generation and has progressed across eras of relative equality and inequality.  And, even in recent decades, there is no clear relationship between the pace of technological change and the growth of wage inequality: the ground lost by lower-wage workers occurred mostly in the 1970s and 1980s and technological change since then seems to have had little effect.  Technological change has accelerated in recent years, during which time most of the gap has grown at the very top of the wage distribution.

And third, whatever causal importance we assign to technological change, it is hard to see it as a credible account of the different trajectories of inequality across countries.   Like globalization, technological change is a challenge faced by all national economies.  And yet differences across national settings (and especially the outlying status of the United States) remain profound.   This graph charts the gini index of inequality against two simple metrics of educational achievement (average years of schooling for those over 15, and share of the same population with a postsecondary education) for the United States and its peers.  Over the era of rising inequality since the 1980s, the U.S. exceeds most of its peers in both educational attainment and inequality.

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