Sure, More Education Will Reduce Inequality (A Tiny Bit)

A recent editorial in the Wall Street Journal entered a long and contentious debate about the economic impacts of college. Would more Americans earning further credentials beyond high school reduce the well-known problem of American inequality? The piece answers this question with a resounding yes.

This is technically true. More education would reduce inequality, but only by a very, very small amount. According to the article:

Education remains the chief American institution that promotes economic and social mobility for poor and disadvantaged citizens. It’s not an evasion; it’s the direct answer to the question of what the nation needs to improve its talent pool and improve economic opportunity and social equality.

This is because Americans with college degrees, or even vocational credentials, out-earn those with few skills. Going to college (or receiving job training) beyond high school is a good way to ensure a relatively stable lifestyle. It enables someone to obtain jobs with health care and benefits, save to buy a house, and plan for retirement. This is true even despite the vast increase in student loan burdens now necessary to pay for college. As the authors write:

Harvard economists Claudia Goldin and Lawrence Katz find that the growing difference in the earnings of college graduates and high-school graduates explains between 60% and 70% of the rise in wage inequality between 1980 and 2005.

It’s true that education promotes economic mobility, but a lack of mobility isn’t the cause of American inequality; the cause is that the average American, professional or working class just doesn’t have money as someone in his station used to have 30 or 40 years ago.

Improving wage inequality is great, really it is, but that’s not the inequality that matters here. It’s not wage inequality that’s important; it’s wealth inequality.

TheSuperRichAndEveryoneElse

Since 1980, in fact, the changing wealth distribution isn’t about the “difference in the earnings of college graduates and high-school graduates;” it’s all about the amount of money vacuumed up by the top sliver of the country. The 99.9 percent that are the rest of us got virtually nothing. This is not leftist radicalism; it’s just the truth.

In 1978 the top 1 percent of this country owned 7 percent of American wealth. Today it’s got 22 percent.

The United States now has a wealth distribution roughly like that of czarist Russia. The real financial winners here are the top tenth of one percent. That’s like 160,000 families.

Now, it’s true that if you’re say, a single parent working a part time job at Walmart, you can do a lot better if you go to community college and get training to be a licensed practical nurse. You can do a lot better than that if you get a four-year degree and become an accountant. You can do even better if you keep going and become a lawyer. Those sort of differences matter a great deal in terms of how stable one’s life is, but it matters not at all in terms of the real distribution of wealth in America.

Real inequality isn’t about the difference between a retail associate and a lawyer; it’s about the difference between the plutocracy and everyone else.

Saying education is the solution to most of this problem is sort of like saying better diets would reduce the cost of American health care. It would, but not significantly. Because the reason for the incredibly high cost of American health care isn’t the quality of the American diet; it’s perverse incentive structure of the system itself.

Since the 1980s we’ve seen a serious of policy and tax priorities shift to favor the American superrich. The poor got poorer, yes, but so did the American middle class. Making more people professionals wouldn’t do anything to fix that problem. That’s because virtually all college graduates and people who’ve taken part in high quality training programs don’t then become the superrich. They stay the struggling 99.9 percent too.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer