What accounts for rising inequality [of income]? Some pundits are tempted to look inside the Beltway for a cause, but the case is hard to make. Government policy makers do not have the tools to exert such a strong influence over pretax earnings, even if they wanted to do so.
Also, the trend toward increasing inequality has been fairly steady, despite changing political winds. The income share of the richest families increased substantially both during Ronald Reagan’s eight years in office and during Bill Clinton’s.
The best diagnosis so far comes from two of my Harvard colleagues, Claudia Goldin and Lawrence F. Katz, in their forthcoming book “The Race Between Education and Technology” (Harvard University Press). Professor Goldin is an economic historian, and Professor Katz is a labor economist who briefly worked in the Clinton administration. Their bottom line: “the sharp rise in inequality was largely due to an educational slowdown.”
According to Professors Goldin and Katz, for the past century technological progress has been a steady force not only increasing average living standards, but also increasing the demand for skilled workers relative to unskilled workers. Skilled workers are needed to apply and manage new technologies, while less skilled workers are more likely to become obsolete.
For much of the 20th century, however, skill-biased technological change was outpaced by advances in educational attainment. In other words, while technological progress increased the demand for skilled workers, our educational system increased the supply of them even faster. As a result, skilled workers did not benefit disproportionately from economic growth.
But recently things have changed. Over the last several decades, technology has kept up its pace, while educational advancement has slowed down. The numbers are striking. The cohort of workers born in 1950 had an average of 4.67 more years of schooling than the cohort born in 1900, representing an increase of 0.93 year in each decade. By contrast, the cohort born in 1975 had only 0.74 more years of schooling than that born in 1950, an increase of only 0.30 year a decade.
Because growth in the supply of skilled workers has slowed, their wages have grown relative to those of the unskilled. This shows up in the estimates of the financial return to education made by Professors Goldin and Katz. In 1980, each year of college raised a person’s wage by 7.6 percent. In 2005, each year of college yielded an additional 12.9 percent. The rate of return from each year of graduate school has risen even more — from 7.3 to 14.2 percent.
The Wealth Trajectory: Rewards for the Few
By N. GREGORY MANKIW
I've been assuming that something like this was the case for the last four years. Sounds like this book is going to nail it down, or come close.
Steve Levitt summarizes The Race in 2 sentences
Jimmy graduates
The anemic response of skill investment to skill premium growth
The declining American high school graduation rate: Evidence, sources, and consequences
Pushy parents raise more successful kids
The Race Between Education and Technology book review
The Race Between Ed & Tech: excerpt & TOC & SAT scores & public loss of confidence in the schools
The Race Between Ed & Tech: the Great Compression
the Great Compression, part 2
ED in '08: America's schools
comments on Knowledge Schools
the future
the stick kids from mud island
educated workers and technology diffusion
declining value of college degree
Goldin, Katz and fans
best article thus far: Chronicle of Higher Education on The Race
Tyler Cowan on The Race (NY Times)
happiness inequality down...
an example of lagging technology diffusion in the U.S.
the Times reviews The Race, finally
IQ, college, and 2008 election
Bloomington High School & "path dependency"
the election debate that should have been
Literacy level & Hourly Earnings
ReplyDelete1. $8.90
2. $11.55
3. $13.55
4. $17.75
5. $21.45
I have a nice graph, and a link to show how few people are in the top two categories. All the upper categories have a poor percentage of minorities.
http://www.thephonicspage.org/On%20Phonics/profitable.html
A sad fact is that 70% of prisoners are in the bottom two categories. Retarding America: The Imprisonment of Potential show how teaching prisoners to read with phonics actually saved almost $2 (I think it was $1.83, but I don't remember the exact figure) for each dollar spent on teaching juvenile delinquents phonics. It was published in 1993; unfortunately, there were no takers in the prisons here.
The Brits have a volunteer effort that is working, the book they are using is a good phonics based method that uses syllables (Toe-by-Toe) They have similar numbers of illiterate prisoners:
http://www.shannontrust.com/
You can see their work with syllable division in toe-by-toe here: http://www.toe-by-toe.co.uk/pages62_63.htm
(they also use nonsense words, which I'm a big fan of for remedial students.)
It used to be that, statistically speaking, taking an airplane raised a person's wages, too.
ReplyDeleteThat doesn't mean that putting poor or dumb kids on an airplane would raise their wages. It was just an association fallacy.
Perhaps schooling hasn't offered anything to anyone in decades, other than that only the smart or skilled or otherwise capable could manage it. i.e. few have been "taught" anything at all. Maybe getting through college was just a proxy for "already skilled enough to be a skilled worker". And now, many more people attend at least "some college", so the skill level needed to show your skills is upped to the grad level.
Mankiw uses a relative measure, more schooling than the prior cohort, but really, if everyone in the country had a phd, then educational advancement of the next cohort would be at zero, too. The slowing of growth in that case wouldn't mean wages would have grown relative to the (nonexistent) unskilled, necessarily. You have to have some actual objective numbers here to see if more or fewer skilled workers are being created.
College matters, but thinking that attending college, or getting into college solves your problem just means you think taking that airplane ride will help you, too.
To go against Mankiw's last line about Blankfein, Mr. Blankfein's biography tells more about him than his Harvard pedigree. (Go to wikipedia for it.)
He was raised in the Linden Houses in the NYC housing authority. His father was a postal clerk. He went to NYC public schools. The combination of traits needed so that you succeed at Harvard and Harvard Law, then at Donovan, Leisure, Newton, and Irvine, then as a gold bar and coin salesman at Goldman's J. Aron commodity trading desk are not traits that the rest of us mere mortals have.
The history of the success stories at Goldman Sachs and at Salomon Brothers does not indicate the need for a degree from Harvard at all. Several of the chairs there worked their way up, one of the richest folks there started as a mail clerk.
One of the interviewees on "Breaking the Code" (I think that's the page) says that some states project the need for prison cells based on reading scores in 1st grade.
ReplyDeleteIt's Children of the Code.
ReplyDeleteInstead of building more prison cells, wouldn't it be smarter to teach smarter?
Some of my remedial students haven't been on the upper end of the IQ curve, but with enough repetition when taught with no sight words and repeated phonics, all my students learned to read. (The repetition is the only part I don't like. That's part of the reason I have dozens of phonics books--at least, when you're repeating the same thing, it's in a slightly different format. My students would do fine with 1 or 2 books, but I would go crazy without being able to change things up more, especially for the lower end students who need so much repetition.)
not "smarter" ... merely more ethical.
ReplyDeletethe enemies of humanity
(the entities running things)
aren't *stupid* ... they're *evil*.
step one: quit assuming
good intentions.
One of the interviewees on "Breaking the Code" (I think that's the page) says that some states project the need for prison cells based on reading scores in 1st grade.
ReplyDeleteThis is a compelling statistic, but it seems to be an urban legend. If someone can find a verified source -- a real government document, policy paper, or anything of the sort as opposed to a quote from somebody quoting somebody who is quoting somebody, I'd love to see it -- I've seen this trotted out over and over again since before there was an Internet, but have never been able to verify a single reliable source. It's so memorable, like the Doberman and the human fingers, that one feels it's GOT to be true -- but where is the data?
What we can be sure of is that low literacy is a problem in the prison population. However, from working with a community organization that assists young people in trouble with the law, I learned that in fact the rate of literacy of juveniles in the justice system correlates most closely with their socio-econiomic status. Poorer kids are disproportuionately represented in the juvenile court system, and the level of literacy of those involved correlates pretty well exactly to the literacy levels of those of a similar SES who are not in trouble with the law.
Boosting their literacy skills may be a positive step towards rehabilitation, however. The literacy/crime relationship is more correlation than causation. A much more significant factor in hard-core prison populations -- including juvenile offenders -- is Fetal Alcohol syndrome, which is much more common than typically supposed and which causes permanent damage to the brain's feedback loop so that the affected individual cannot control his or her impulses.
It's not a "sexy" issue so it doesn't get much coverage, but there is good information here
here and here and here
Not to minimize the importance of literacy, but we will not solve the problem of hard-to-rehabilitate prisoners with literacy alone.
Another unsexy fact is that FAS is more common in babies born to middle class women. Such children are more likely to be identified with ODD, LD, CD and so on, but about 10% of infants are exposed to alcohol in utero.
The source I've always used for the reading & prison cells connection is the Children of the Code interviews with Lesley Morrow & Grover Whitehurst.
ReplyDeleteIt does sound like an urban legend.
Whitehurst simply says that poor reading and prison are highly correlated -- that we could definitely track down peer-reviewed support for...