Wednesday, May 27, 2015

Still think that college is a waste...............................

Skills, not wealth, drive U.S. income inequality

Education, especially at an early age, leads to college and higher wages

Howard Gold

As soon as it was published just over a year ago, Thomas Piketty’s “Capital in the 21st Century” became the most influential book on economics since the turn of the millennium.
The dense, nearly 700-page tome, which used decades of data from many countries, spent 22 weeks on The New York Times best-seller list and was named the Financial Times and McKinsey Business Book of the Year. It intensified an already red-hot debate on economic inequality.
The facts are clear: The top 1% of U.S. households takes in more than twice as big a share of income as it did in 1979, while middle-class incomes have stagnated since the mid-1990s. The debate is over what causes this growing divide and what to do about it.
Piketty argued that wealth itself, especially inherited wealth, gives the rich advantages that only increase over time. His now famous equation (r>g) states that return on capital exceeds economic growth, so that capital keeps accumulating, like a perpetual-motion machine, deepening the divide between the wealthy and everyone else. He advocated a progressive global wealth tax to correct the imbalance.

In 2013, college graduates earned 98% more an hour than high-school grads, according to the Economic Policy Institute.

But the U.S. gave him problems. Unlike his native France, he found that “the unprecedented increase in wage inequality explains most of the increase in U.S. income inequality” (Italics added.)
And what drives wage inequality?
“Over the long run, education and technology are the decisive determinants of wage levels,” Piketty conceded. “If inequality is to decrease, … the supply of new skills must increase even more rapidly, especially for the least well-educated.” (I wrote more about this topic here.)
Unfortunately, Piketty’s preoccupation with inheritance caused him to miss much deeper causes: The principal transmission vehicle for income inequality in the developed world, particularly the U.S., is educational wealth, which goes hand in hand with affluence.
The advantage of a college degree has grown considerably over the past three decades, and those who don’t have one have fallen further behind.
In the 2000s, automation and offshoring eliminated 5.7 million U.S. manufacturing jobs that used to provide middle-class incomes to high-school grads.
In their place, people who don’t have college degrees increasingly have taken low-wage or part-time jobs.

In 2013, college graduates earned 98% more an hour than high-school grads, according to the Economic Policy Institute. There’s a steeper wage premium for those who have advanced degrees, particularly in the STEM (science, technology, engineering and mathematics) fields.

Getting even to the college level, however, is much more difficult for young people who are not “bathed in cognitive and financial resources” from the very beginning, as the University of Chicago’s Nobel Prize-winning economist James Heckman put it.
Children who have educated parents have nearly an insurmountable edge in acquiring human capital, the principal currency of an information economy.
Only 20,000 of the 70,000 top-scoring low-income students in the U.S. even bother to apply to top colleges, Richard Sander of UCLA School of Law found.
“Students from the wealthiest families outscored those from the poorest by just shy of 400 points” on Scholastic Aptitude Tests, The Wall Street Journal reported.
And it’s not just test prep; children of educated parents get enrichment programs from music lessons to summer camp from their toddler years on. They go to better schools in safer neighborhoods, have many after-school activities, get tutoring when they need it, and have knowledgeable college-admissions counselors.
So it’s no surprise that Sean Reardon of Stanford found that “the gap between rich and poor children’s math and reading achievement scores is now much larger than it was 50 years ago.”
A famous study by Betty Hart and Todd Risley from the University of Kansas found that “by age 3, a poor child would have heard 30 million fewer words in his home environment than a child from a professional family, … so a language deficit is passed down through generations.”

Researchers recently found that children who grow up in families whose annual income was less than $25,000 a year had brain surfaces that were 6% smaller than those of kids whose families earned $150,000 or more.
And unfortunately, concluded James Heckman and University of Chicago colleague Stefano Mosso,
“To our knowledge there is no evidence of full recovery from initial disadvantage.” (Italics added.)
On a more hopeful note, however, Heckman wrote: “High-quality early education can be an equalizing factor.”
Some universal pre-K programs and early-intervention experiments like those in Providence, R.I., have shown promise in narrowing that critical gap.
But now, more than ever, knowledge is power. Passing critical skills from one educated generation to the next confers as sure an advantage in the 21st century as land and titles did in Piketty’s native France in the 19th. By focusing so intently on inherited wealth rather than education as the root of economic inequality, Piketty missed the forest for the trees — and the path to solutions that might really work.


  1. Having spent a great part of my life in higher education, I must agree with this report. I have never understood why people say that a college degree is not worth the trouble when every measure refutes their claim.

    1. They don't knock the degree for the time and trouble Mick it's the cost. Yes college is expensive but the results have been proven. Of course the repubs will rehash the welder in Texas that makes a 6 figure income, rare in that field and will neglect to tell you he learned his craft in community college.

  2. Well, many of the conservatives I read say that college grads make no more than non-college grads, which is clearly untrue. Perhaps they think that the expense of their student loans levels the field, which is again clearly untrue. Maybe it's just wishful thinking.

  3. Interesting how you claim conservatives believe. What conservatives??

    As a conservative that holds a BSEE and a MBA, your generalities are a joke. Here's one, most of the poor and middle class voting for Dems are uninformed and vote for who will give them the most freebies.

    How pathetic.

    1. The conservatives who post on the internet blogs.

    2. Louman the majority of the conservative talking heads have been bashing the college education for the last couple of years. I do understand some bias as Obama has made it easier to get loans and repay them and student debt is very high. But The fact remains that one who has a degree in just about anything will make quite a bit more then one who only has a high school diploma. The STEM disciplines exacerbate the wage gap between those who do and those who don't. I feel sorry for anyone in today's world without a great education. They are totally lost.

  4. Mick, What can I say, you obviously know few conservatives in the world.

    Rick, the same applies to you.

  5. Thomas Jefferson never used the terms Freshmen, Sophomore, etc,,,he called students by the term they were in, first year, second year, etc.

    He said you came to university to get the education you needed. When you had it you left. I trust his thinking. And I also think this applies to other levels of academics as well.

    The problem we have is a lack of flexibility in learning. I think the net is changing this. I also think that the liberal east and left coast units of higher learning will eventually, or probably already, mostly just educate rich people's kids.

    Higher education is not the only problem. Students in many cases come to university woefully unprepared. Therefore requiring remedial leveling, therefore wasting precious resources, therefore wasting (read more borrowed) money.