Is an Education Gap Fueling Income Inequality?
2014 has been the year of “income inequality.” French economist Thomas Piketty’s massive book Capital in the 21st Century was published in English, and strangely rose to the top of the bestseller lists (something that doesn’t usually happen to thick economics texts). The issue of income inequality became the favored talkingpoint for many politicians.
We Believe Education is the Key
Whether one is accepting or skeptical of Piketty’s claims and data, there is one point we think is crucial in any discussion of income inequality, and that is the role of education. We’ve spoken about this point many times, and our attention was recently drawn to it again when we saw the 2014 publication of the OECD’s Education at a Glance — an annual publication of global statistics on education and its effects on economic wellbeing. Some of the data from this report were highlighted in a New York Times op-ed, and we found them concerning. For example:
- Only 30 percent of Americans end up exceeding their parents’ education levels, far worse than most of the
U.S.’ peers; - Of Americans aged 25 to 34 whose parents didn’t finish high school, only one in 20 has a college degree; developed economies in the OECD average one in four.
Those statistics, and others, suggest that upward mobility — or the lack of it — is closely tied to educational achievement:
Technological Changes
The historical process driving these trends is clear, and we’ve commented on it before. After the Second World War, the U.S. led the world in its citizens’ educational achievements — in the days when “achievement” meant a high-school diploma, and a high-school diploma was enough to offer a ticket to a wellpaid industrial job.
Now, automation and the entry of developing-world workforces into the global labor market has meant that a high-school education is no longer enough — and so the divergence between economic outcomes for highschool and college grads has sharply widened over the past generation.
Some countries, notably Germany, have attacked this problem with robust vocational training as an alternative to the pursuit of a bachelor’s degree. Germany is known for its highly skilled industrial workforce, which has permitted it to retain global dominance in precision manufacturing. In the U.S., the conversation has focused almost exclusively on state support for university education — which some argue has actually pushed the price of that education higher, and further out of reach of those who need it most.
The U.S. Must Adapt
While statistics on income inequality are concerning, we see the statistics on U.S. education as being closer to the heart of the matter. If income disparities are worsening, it is likely because the U.S. is not adapting rapidly enough to technological and geopolitical trends by putting policies in place that will encourage the effective training of its workforce. The growth and prosperity of the post-war generation could be reclaimed, but only if workers are trained for the real world — and that is something that government policy can encourage or obstruct.
