May 17, 2007

Income Inequality in America

Tyler Cowen has a good article in today's NYT on the causes of income inequality in America.

The most commonly cited culprits for the income inequality in America — outsourcing, immigration and the gains of the super-rich — are diversions from the main issue. Instead, the problem is largely one of (a lack of) education.


College graduates have been gaining relative to high school graduates...

Starting about 1950, the relative returns for schooling rose, and they skyrocketed after 1980. The reason is supply and demand. For the first time in American history, the current generation is not significantly more educated than its parents. Those in need of skilled labor are bidding for a relatively stagnant supply and so must pay more.

The return for a college education, in percentage terms, is now about what it was in America’s Gilded Age in the late 19th century; this drives the current scramble to get into top colleges and universities. In contrast, from 1915 to 1950, the relative return for education fell, mostly because more new college graduates competed for a relatively few top jobs, and that kept top wages from rising too high.

... Improvements in technology have raised the gains for those with enough skills to handle complex jobs. The resulting inequalities are bid back down only as more people receive more education and move up the wage ladder.

Income distribution thus depends on the balance between technological progress and access to college and postgraduate study. The problem isn’t so much capitalism as it is that American lower education does not prepare enough people to receive gains from American higher education.

Bingo. In America, as in many western countries, K-12 education has been stagnant for the past 50 years. Student performance remains flat. Productivity is decreasing because we spend more and more with nothing to show for it.

Bottlenecks currently keep more individuals from improving their education. Professor Katz has suggested changes at multiple levels, including additional college aid, more-accessible community colleges, easier financial aid forms, more serious attempts to identify and retain top teachers in high schools and school voucher experiments.

The bottleneck is K-12 education. But, there's scant evidence that any of those things are going to improve K-12 education.

Vouchers? Have you seen the state of private schools lately? The private schools that do well mostly do well because they are loaded with easily educable kids, not because they employ superior instruction. I visited my son's CCD class at our local parochial school last Sunday and there I saw the same rotten reading and math programs that our local public school uses.

It doesn’t suffice simply to increase the number of people in college; rather the new students must be prepared to learn. There is, however, no single magic bullet.

There isn't a magic bullet for most of the problems we face today, so I'm not sure why Tyler is looking for one in education. The "solution" will be found in the same places it is found in other areas -- through lots of hard work by skilled people.

Pessimists like Charles Murray, co-author of the much-debated 1994 book “The Bell Curve,” have argued that only so many individuals are educable at a high level. If that were the case, current levels of inequality might be here to stay.

Unfortunately, the evidence seems to be on Murray's side (though I've disagreed with him on many of his recent policy forays). Even with a far superior K-8 education, there is little evidence to suggest that you can prepare the bottom 2/3 of the curve for a rigorous college education in a competitive major that employers are looking for. Sure, you can cherry pick the smarter ones at the margins who are currently being underserved. And, you can pull many of these kids out of illiteracy and innumeracy, but there is a long way between being literate and numerate and being prepared for college level work.

Primarily, the problem remains language acquisition. Language skills are especially difficult to acquire for low performers who (a) lack the cognitive ability to learn language quickly and (b) typically, do not grow up in language rich households. Most of the advanced vocabulary students will need to succeed in college will only come from reading lots of difficult books-- the kind of books that don't get assigned much anymore.

We could be doing a lot better with K-12 education today and improving the lot of many underserved students. Many average students would benefit immensely from a decent high school education instead of the watered-down babysitting that they get today. many lower performing students would benefit immensely if they learned to read and do basic at an eighth grade level. But you're never going to get equality of college education for the same reason you don't see midgets playing in the NBA.


Anonymous said...

"Why Is Income Inequality in America So Pronounced? Consider Education"

"What has changed is that highly skilled laborers earn more labor income than low-skilled workers."

"College graduates have been gaining relative to high school graduates..."

So more jobs are created at the high-skill end, there are more jobs than workers, the salaries get driven up, the income range increases, and those at the low end don't get the education they need to get those jobs.

This is a problem even if there wasn't a large spread in income. Would a child, who didn't get a good education, be happy if he/she knew that those with college degrees weren't getting that much more money? Individuals don't care about income inequality, they care about opportunity.

I don't know why people complicate the issue. K-12 education really stinks. There are low expectations, poor curricula, and bad teaching methods. There is a monopoly and no effective process for change. The reason many kids do well is not just because they have high IQs, but because their parents don't let the schools screw things up too badly.

I have always disliked education arguments based on economics, academic gaps, IQ, or statistics. Individual kids matter. You can't help poor or urban kids as a class. You have to help them one by one. The goal is equality of educational opportunity, not equality of results.

"The lesson is this: Economists are homing in on the key to the inequality problem, but don’t think any solution will necessarily last for long."

What is a "key"? What is the point?

First this:

"Instead, the problem is largely one of (a lack of) education."

Then this:

"Technology is advancing faster than our ability to educate."

First he says that the problem is education, but then he says that it doesn't matter because it can't be solved. Is the goal of an economist to highlight high-level economic trends or to define "problems"?

Like the academic gap, income inequality is not the problem. Bad K-12 education is the problem. You need to shift the educational bell curve to the right and make sure that it is based on ability and hard work, rather than parental help or tutors. There is no downside and supply and demand will take care of itself.

TurbineGuy said...

I was recently speaking to the director of vocational education at our local community college. He was telling me how hard it is to find students for some of their programs.

He was out recruiting for his welding certificate program. Even though graduates started out making 40 to 50K a year, there is an huge shortage of qualified pipe welders.

Unfortunately, our school system seems to screw with kids on two levels. First they drill it into kids that if you don't have a college degree you are doomed, then they provide an inadequate education.

Catherine Johnson said...

I didn't understand the last two paragraphs of the article...

Technology is advancing faster than our ability to educate....but education isn't dynamic...but we might have the key to inequality....but a solution won't last for long...

I don't follow.

Anonymous said...

"First they drill it into kids that if you don't have a college degree you are doomed, then they provide an inadequate education."

But supply will meet demand. Have you seen some of the schools that pass for colleges? Many colleges (community or otherwise) are glad to take their money. Even back when I taught, we were giving college credit for what amounts to an 8th grade algebra course. There has always been a big variation in rigor between colleges, but it's even worse now that everyone wants to go to college.

Even most vocational schools are now colleges giving out 2- and 4-year degrees. Everyone wants a degree. Many more people will have degrees, but supply and demand will rule.

Anonymous said...

"Technology is advancing faster than our ability to educate....but education isn't dynamic...but we might have the key to inequality....but a solution won't last for long..."

"I don't follow."

Some people come up with what they think is a key insight and then try to force reality to fit.

The presumption is that the requirements of education are directly tied in with the rapid advance of technology. Of course, the problem of K-12 education is not about teaching Java or web programming, but teaching things like algebra, which is anything but modern.

One could say that the shift in jobs due to technological innovation requires more people to have a better education, but this goal is not a moving target. Math, science, reading, and writing don't change that quickly.

Besides, you could save $150,000+ on college and work as a pipe fitter. Calculate how much $150,000 is worth by retirement time.

Mrs. N said...


I really hate how education both denies and enforces the bell curve at the same time.

In my state, we were reaching a high level (over 75%I believe) and the way our state dealt with that, rathe than congratulating us and our students for our hard work was to raise the minimum proficiency score, basically saying it wasn't high enough if so many kids could pass it.


Anonymous said...

And I agree with the part about the bad stuff now is even taking over our parochial schools, where one would think these bad fads would not creep in. My kids' parochial school's reading program has a huge look-say component, and their math program places the onus on parents to teach math facts while the math textbook "teaches" (read: mom helps kid at home and kid has "learned" nothing) kids to solve complex story problems without teaching kids how to choose and use the proper algorithm.

The kids that have difficulty? Yeah, their parents spend money getting their kids tutoring through the school's after school tutoring program, where they continue to stay behind because the kids are being tutored with more of the same stuff they are using in school -- go figure. The ones who don't stay behind go to Kumon and Sylvan.

harriska2 said...

"Like the academic gap, income inequality is not the problem. Bad K-12 education is the problem. You need to shift the educational bell curve to the right and make sure that it is based on ability and hard work, rather than parental help or tutors. There is no downside and supply and demand will take care of itself."

I don't get that quote. Shift the curve to the right? You mean concentrate on the smart kids?

So kids that get tutoring should be left to the wolves?

Yes, supply and demand is working wonders in our country. We need technicians, programmers, engineers. And we are doing a wonderful job of supplying them from overseas. What kind of answer is that? How about work on our own issues to give kids an equal and high basic education in order to keep from picking our labor pool from overseas.

Anonymous said...

Shift the curve to the right = move achievement up for ALL students, but with a similar (and rather unchanging) distribution. In other words, it is possible to improve academic achievement for everyone, it's just that the more capable kids will remain as such, as will the strugglers. The strugglers may not gain much on their more advanced counterparts, but that doesn't mean they cannot achieve a reasonable level of competence. The phrase implies focusing on everyone -- not just the advanced students and not just the strugglers.

Roger Sweeny said...


Are you okay? You havn't posted in over a month. I'm getting worried.

Math Teacher said...

We miss you. Considering how prolific you had been, I, too, am wondering if all is okay.

KDeRosa said...

Hi Guys

The reports of my demise have been greatly exaggerated. Just taking a little break and catching up on non-educational stuff. I'll be back soon.

TurbineGuy said...


I know the latest Supreme Court ruling has to be tempting to blog about... enjoy your vacation.