Education part of inequality story, Fed post says


Education is partly to blame for the rise in inequality, according to Atlanta Fed economists.

That’s not a reason to discourage schooling, they wrote this week, but it might be helpful in figuring out what to do about the yawning economic gap between Americans at the top and those farther down the chain.

In short: people with more education are doing better, people with high school or less are doing worse.

The economists tried to “control for” experience and age, that is, to mathematically eliminate them as factors. When they did, they found that higher wages paid to older, more experienced workers, was not a cause.

However, they found that education had an outsized impact.

“We intend this post to add to the evidence that growing educational attainment has contributed to rising inequality,” wrote research economist Julie L. Hotchkiss and Fernando Rios-Avila, a research scholar at the Levy Economics Institute of Bard College.

The researchers were quick to add that they are not saying that education is the only reason for rising inequality. And they likewise emphasized that they are not saying more education is a bad thing.

But the evidence is clear, they wrote, that there is a link between education and inequality “and understanding that association will be central to understanding the overall growth in inequality in the United States.”

The Fed economists don’t try to explain what is behind their finding.

But for many years, there has long been a “premium” – that is, higher pay – for most people with more education. On average, people with less education have made less.

It’s just that the economic impact of that split has grown harsher.

Many jobs that used to provide decent incomes to low-educated workers have been eliminated. At the same time, hiring in the past several years has been anemic, so many people with college education have been applying for jobs that in the past did not require a degree.

That only pushes other workers farther down the economic ladder. And that outcome is worst for those who do not finish high school.

As a political issue, inequality is controversial, raising the question of whether government policy is partly responsible and whether policy changes should address it. There have been arguments as well, about the causes of inequality.

Liberals have often blamed tax policies and CEO pay. In contrast, Stephen Moore of the conservative Heritage Foundation, argued recently that rising inequality was caused by policies in more liberal states.

But as an economic issue, the existence of greater inequality is supported by substantial evidence, write Hotchkiss and Rios-Avila. “There is little debate about whether income inequality has been rising in the United States for some time, and more dramatically recently.”

Inequality has been growing steadily greater since the late 1970s, according to the most-cited measure, which is known as the Gini Coefficient. But only in the last few years has concern about inequality grown, perhaps fueled in by the struggles of many Americans to get ahead – even before the vicious recession of 2007-09 and the tepid recovery since.

Many economists have argued that “real” American wages, that is, wages adjusted for inflation, have been largely stagnant since the early 1970s, except for several years starting with the boom of the late 1990s.

A separate study by Rios-Avila and Hotchkiss — done recently for the Levy Institute – concluded that it has become even worse than that: Inflation-adjusted wages since the recession of 2001 have actually declined.


Reader Comments ...


Next Up in Business

Massive Georgia nuclear project scores a partial vote to continue
Massive Georgia nuclear project scores a partial vote to continue

An organization that represent city utilities in Georgia voted Monday to keep the nuclear power expansion of Plant Vogtle alive, despite continued cost overruns and delays. But Vogtle’s future isn’t yet settled, even with the unanimous vote for approval by the board of the Municipal Electric Authority of Georgia.  As of Monday afternoon...
Air France to fly A380 super jumbo jet from Atlanta
Air France to fly A380 super jumbo jet from Atlanta

Air France plans to begin flying the super jumbo Airbus A380 jet from Atlanta to Paris starting next spring. As of March 31, 2019, Air France will operate one of its two daily flights from Hartsfield-Jackson International to Paris-Charles de Gaulle on its 516-passenger A380. Air France, a joint venture partner of Atlanta-based Delta Air Lines...
Your eggs probably aren't cage-free
Your eggs probably aren't cage-free

For some time, it seemed like the plight of egg-laying hens-confined to cages so small they can't even spread their wings-was ending. Restaurants, retailers, hotels and manufacturers, as well as food service and hospitality groups, suddenly recognized that consumer revulsion might cost them real money. So they rushed to announce self-imposed deadlines...
Troubled Georgia nuclear project faces another fateful moment
Troubled Georgia nuclear project faces another fateful moment

The future is again in question for a multi-billion expansion of Plant Vogtle in Georgia. But consumers are likely to pay for the nuclear power project even if it’s never completed. By the end of day Monday, energy organizations from around the state are supposed to vote on whether the expansion should be kept alive despite repeated delays and...
More Stories