College and Inequality

Ezra points to a chart showing stagnant wage data for college graduates and non-graduates alike during the oughts and says it "cuts powerfully against the comforting story some tell themselves about inequality, which is that it's skills-based and simply a reflection of educational differences in our grand polity. The massive gains in wealth in this country are apportioning to a small slice of rich people at the very top of the income distribution, not the broad mass of skilled, college-educated workers who hoped they were buying into the economic ruling class but, in fact, are just the new middle."

I think this is misleading on a couple of levels. Take a gander at my chart, reproduced from an EPI report on "Education and the Inequality Debate" and you'll see that while they find no increase in the wage premium in the past few years, there was a huge run-up in the wage premium in the 1980s that hasn't declined at all. It's true that there's more to the inequality story than this, and it's a mistake to monomaniacally focus on educational attainment as the only factor driving inequality, but it's equally foolish to deride the data showing an increase from a 30 percent premium in the early 1970s to a new plateau around 45 percent in the 1990s and 2000s.

An increase of that scale ought to lead to a European-style increase in the proportion of people who graduate from college, increasing the supply of college educated professionals and bringing the premium back down to earth. But it hasn't, for reasons that remain slightly mysterious but appear to implicate, among other things, inadequate preparation for students from disadvantaged backgrounds and screwy priorities on the part of institutions of higher education. Nor, I note, should we view this part of the story as especially "comforting" -- there are some good ideas around about improving the education system, but there are also a ton of unanswered questions and a mountain of information to suggest that dramatically improving school performance for kids from difficult backgrounds is incredibly difficult.

Comments

Matt this is the second time in a few days you state that Europe has higher rates of college graduation. Source please? I just don't see it in the countries I know best, Germany for example. Are you talking about the Scandinavian countries? If so you should be specific. What countries do you mean and what are their stats? I'd be really interested in reading the source you are basing this on.

Posted by David | May 21, 2008 2:20 PM

AUGHTS.

Posted by Bill | May 21, 2008 2:21 PM

There is an assumption here that college is (or ought to be) for everyone and also that skilled labor that does not require a college degree ought not to pay very well.

It was said on the previous thread, but--more vocational education and less college! College does a damn poor job of preparing people for work. All the computer science majors I've worked with need a solid year in the trenches to unlearn the academic nonsense they've studied in college in place of basic programming techniques.

Also, college and vocational training are both too expensive. Both should be essentially free but should be very difficult and those who don't perform well should be booted out and told to try again in a couple of years.

Posted by Rob Mac | May 21, 2008 2:34 PM

Yeah, Ezra's logic doesn't follow. In fact, a plateaued college wage premium could still lead to a ongoing wealth concentration effect among college graduates, on the theory that those with higher wages can spend more of their wages on accumulating assets as opposed to simple consumption.

Posted by DTM | May 21, 2008 2:35 PM

Okay I went to the OECD and am puzzled by your claim about "European-style increase" in going to college.

If you go here and download the Chapter A you will see that the US (at 28%) has the highest level (besides Norway) of Tertiary Education Type A (bachelors and masters degrees):

http://www.oecd.org/document/30/0,3343,en_2825_495609_39251550_1_1_1_1,00.html

Where we are lacking is Type B, vocational training and even here "Europe" doesn't score so well.

So could you please link to the source you are getting this from?

Posted by David | May 21, 2008 2:47 PM

But it hasn't, for reasons that remain slightly mysterious but appear to implicate, among other things, inadequate preparation for students from disadvantaged backgrounds and screwy priorities on the part of institutions of higher education.

Can't forget the big shift in the cost burden of an education at a state college or university, from the taxpayers to the students, that started in the 1980s and doesn't seem to have let up. People didn't used to graduate from college with the huge debt burdens they have today.

If you make a given path more lucrative, more people will take that path. If you make it more expensive, then fewer people will do so. In this case, we've done both in different ways at the same time, and they've canceled each other out.

Posted by low-tech cyclist | May 21, 2008 2:48 PM

My understanding is that college education has been becoming increasingly harder to finance for the last 30-40 years. I'd like to see some numbers and a finer-grained analysis, But I think that that's generally right.

Posted by John Emerson | May 21, 2008 2:56 PM

"Matt this is the second time in a few days you state that Europe has higher rates of college graduation. Source please? I just don't see it in the countries I know best, Germany for example. Are you talking about the Scandinavian countries? If so you should be specific. What countries do you mean and what are their stats? I'd be really interested in reading the source you are basing this on."

By my count, it's actually the third time Matt has stated this in the past week or so and you're not the first commenter to wonder where he's getting this factoid from. I would also like to know what he is basing this statement on, because it doesn't seem accurate.

Posted by Waingro | May 21, 2008 2:59 PM

This chart is too biographical for me to take standing up. I graduated from a fine college in 1972. There were no jobs. I went to grad school for years, in part because what work there was sucked, wages seemingly worse than what's I'd made in high school at the grocery store or working in a shipping department. Finished school in the early 80s, Ph.D -- why not, nothing much happening. Then the tech boom cranked up -- I joined tens of thousands of very well educated folks who poured into high tech (Silicon Valley) and helped spin off the other realms of new-made wealth in finance, for instance -- all of which boosted our incomes as the chart shows -- until the steam ran out of the high tech boom. That's were things still stand. Though we made hay while we could. Our education made a difference in that context only. Until another boom were to come along that really goes for such educated types, the college degrees will do great if they can hold you steady instead of the steep declines in the 1970s -- most of which was inflation-related I suspect.

Posted by SleuthinessInBlogophere | May 21, 2008 3:10 PM

This graph makes it appear that college educated students are doing much better as time passes.

This is a false impression. Real wages for high school educated people are dropping, and median wages for college educated people are flat. The wealthy are doing much, much better. How you visualize matters impacts your conclusions more than you might think.

Posted by Marc | May 21, 2008 3:12 PM

"An increase of that scale ought to lead to a European-style increase in the proportion of people who graduate from college ... But it hasn't, for reasons that remain slightly mysterious"

Mysterious?

Matthew loves to disparage efforts to increase federal aid to college students, and then proclaims it mysterious that the numbers of kids without trust funds going to college doesn't increase.

Posted by Petey | May 21, 2008 3:14 PM

Also check out Kevin Drum's comment, in which he points out that it's not so much that the college premium has gone up, but that the position of the non-college educated has cratered (his word). He suggests, and I agree, that teenagers don't necessarily understand how burdened they'll be by not going to college, and also that the high cost of college and the unavailability of support other than costly loans are huge disincentives. Europe of course is way ahead of us here (many go to college for free or nearly free there), and they also have fewer very poor young children (due to their more generous welfare states), so they have more youth who can reasonably expect to graduate from college.

Posted by beckya57 | May 21, 2008 3:16 PM

David: "If you go here and download the Chapter A you will see that the US (at 28%) has the highest level (besides Norway) of Tertiary Education Type A (bachelors and masters degrees)"

That's the highest degree attained by the population aged 25-64. (Table A.1a)

I guess that what Matthew is referring to is current graduation rates. If you look at table A3.1 you will see that US is below the European average. The older cohorts have a lower percentage who had achieved higher education, dragging the average down, but these countries are ahead in the education of the currently active (in respect to education) cohort.

Posted by puzzled | May 21, 2008 3:21 PM

I think it's important to discuss all forms of compensation, not just wages. Compensation for college graduates has been increasing at normal levels, the problem is that a lot of that compensation comes in the form of decreasingly valuable health insurance. We're getting paid more and more, we just can't do as much with it. In other words, we need to look at health reform and stop focusing monomaniacally (as Matt puts it) on the "is it taxes or education?" debate.

Posted by John | May 21, 2008 3:27 PM

What puzzled said. Even a generation ago we had MUCH higher rates of college attendance and completion that the European countries--and indeed Baby Boomers and older in the U.S. are much better educated on average than their European peers. But American college graduation rates have stayed pretty stagnant over the last decade, while European rates have increased substantially, so among the current cohort of 20-somethings Europeans are much better educated than Americans. But, because previous generations of Europeans were less well-educated than both their American counterparts and subsequent European generations, there's lag time in the aggregate numbers, and European countries' total over 25 populations appear to have similar levels of education to the U.S.--although the distribution across cohorts is very different. There is real concern that current generations of students in the U.S. might actually be LESS well educated overall than the generation of workers who are retiring, despite the increased skill premium for education, which has real economic consequences.

Posted by flippantangel | May 21, 2008 3:38 PM

Good point puzzled, but even looking at the 25-34 cohort for tertiary type A, only Norway, Korea, Iceland, the Netherlands, and Denmark beat the US even here. To my mind that hardly justifies using the adjective "European-style."

Posted by David | May 21, 2008 3:44 PM

There doesn't have to be any mystery here at all. A marginal student facing the decision of going to college or not is not going to get that average college-grad income, he is going to be at the bottom of the distribution. Likewise, he is not going to get the average non-college income, he's probably near the top of that distribution. So he's likely looking at a big direct (tuition) and indirect (lost wages) cost of college in exchange for almost no increase in his earning potential.

This situation is reconciled with the run up in the college-premium because the top college grads _are_ making lots more and are dragging up the average. This doesn't necessarily have any effect on the benefits of college for students at the margin.

Posted by DCreader | May 21, 2008 3:49 PM

Any chance you can index that with the rising cost of college tuition, and perhaps plot the RoI?

I'll be $70k in debt when I get my masters. I will definitely earn more-- but I expect that, along with income lost while studying, any gains will be essentially wiped out for the first decade or more.

Posted by Anthony Damiani | May 21, 2008 3:54 PM

I think the 80's run up represents non graduates sustaining their consumption with borrowing while their real wages plummeted. Their quiet desperation was a windfall for (mostly graduate) bankers and financiers.

If I'm right, the plateau represents the limits of this process. Non graduate wages have pretty much hit the floor. Software programmers, engineers and many other graduates are losing their jobs now, and the financiers have accidentally rediscovered how far one can divorce money from productive economic activity, before the whole thing comes crashing down.

Posted by aatos | May 21, 2008 4:17 PM

Re "there are also a ton of unanswered questions and a mountain of information to suggest that dramatically improving school performance for kids from difficult backgrounds is incredibly difficult. "
-------------
No it isn't. Start offering those kids as much as American Idol or the NFL for solving calculus problems and you'll soon have a shitload of math geniuses on your hands.

That which gets REWARDED gets done.

People who bitch about "academic achievement" just want to justify a deeply inequitable country/government which gives the rewards to a wealthy 1 percent and fucks the rest. Which thinks 50 percent of our country's citizens are only good to be cannon fodder in foreign wars or should be locked up for life in some jail cell.

All of the Reality TV shows -- which let corporations get rich using OUR public airwaves in exchange for nothing -- are DEVOTED to promoting the line that everyone should be a Republican.

That the secret of life is to lie, to betray your friends, to play the game, and to eat whatever pile of shit is shoveled to you by the referee. With being "Voted off the island" a constant possibility.

Our educational system, our news media, and even our entertainment industry are DEVOTED to turning us into a bunch of dumb fucking sheep. When they're not telling us about the psychotic Muslims, that is.

Posted by Don Williams | May 21, 2008 4:21 PM

What David said. In the most recent age cohort, the Europeans have caught up with America in rates of college graduation, but hardly surpassed us (except in Scandinavia). Yglesias seems to imply that rates in Europe are five or ten points higher, which they aren't.

Posted by y81 | May 21, 2008 5:25 PM

Anthony Damiani:

Any chance you can index that with the rising cost of college tuition, and perhaps plot the RoI?

I'll be $70k in debt when I get my masters. I will definitely earn more-- but I expect that, along with income lost while studying, any gains will be essentially wiped out for the first decade or more.

Right, tuition increases are a no brainer part of the equation. Even if the return is still worth it rising costs are a serious barrier to entry and raise the risks of investing in a college degree even if the average return is still worth it.

Posted by AJ | May 21, 2008 6:17 PM

As has been previously pointed out, with hourly wages of recent college graduates at $21 for males and $18 for females, the college premium is nothing to write home about. There is an interesting historical overview of the college premium here, showing that the size of the premium has been highly responsive to supply and demand. Flooding the market with millions of college graduates isn't going to do anything for anybody. Even without taking into account that by and large what passes for a college education today wouldn't have made the grade for a high school diploma 75 years ago (discounting for scientific and technological changes, of course).

What David says about the OECD tables. The Europeans are not engaged in a frenzy of building and staffing new universities.

Posted by gordonminor | May 21, 2008 6:35 PM

The problem with Matt's analysis is that he assumes correlation = causation.

How much of the wage increase from college comes from actual value added in college, and how much comes from the fact that people who graduate college tend to be smarter people with more lucrative skills to begin with?

Posted by Glaivester | May 21, 2008 6:50 PM

Thinking for a moment about demographics explains this graph. What was going on in the 70s? Lots of young baby boomer college graduates entering the work force. My mom remembers getting paid less at her professional job than waitresses. That's because young and cheap college graduates were thick on the ground.

Posted by bjk | May 21, 2008 7:14 PM

SleuthinessInBlogophere comment above explains it better than I did.

Posted by bjk | May 21, 2008 7:18 PM

Re: But American college graduation rates have stayed pretty stagnant over the last decade, while European rates have increased substantially, so among the current cohort of 20-somethings Europeans are much better educated than Americans.

Um, it’s not as if American rates have substantially declined. As I read it, Europe has simply caught up to the US, sending (more or less) as many of its people to college as can do so—there is after all a large fraction of the population, anywhere, which is not and never will be college material. Now, I realize most people on these blogs are college educated (myself included) but I do think we should look beyond our own class and interests. Most of us will do OK (yes, we will just be middle class, not overclass, but that was never more than a drunken fantasy anyway). For people who do not go to college, what sort of future awaits? IMO, these are the people who need help, not us. There are decent paying jobs for us (if not perhaps very secure jobs). What jobs are there for the high school graduates?

Posted by JonF | May 21, 2008 9:32 PM

Matt says:

"Nor, I note, should we view this part of the story as especially "comforting" -- there are some good ideas around about improving the education system, but there are also a ton of unanswered questions and a mountain of information to suggest that dramatically improving school performance for kids from difficult backgrounds is incredibly difficult."

Yes, Matt is finally starting to catch on.

Posted by Steve Sailer | May 21, 2008 10:18 PM

How many more years before Matt figures out that one logical implication of his realization that "dramatically improving school performance for kids from difficult backgrounds is incredibly difficult" is that we shouldn't be letting in so many people from difficult backgrounds via illegal immigration (in other words, when you find yourself in a hole, the first thing to do is to stop digging)?

I would put the over-under at four years, which would still put Matt considerably ahead of the typical DC-NY pundit.

Posted by Steve Sailer | May 21, 2008 10:57 PM

Finland managed to improve education and in a rather short time. Not only that, but they managed to mitigate if not erase the effect of class differences.

It is only "incredibly difficult" because the will is not there. Children are regarded as consumers to exploit rather than as precious carriers of knowledge and culture. We have to decide which it is going to be since they can't be both.

Two things are necessary: 1) there must be a degree of federalization of funding and control (and not by private profit-making examination/textbook conglomerates, which ought to be nationalized).

2) Mass media must make education a priority on the lines of what Don Williams remarked on above (this means commercial television directed at kids (mental junk food) needs to be regulated.

Posted by harold | May 22, 2008 1:08 AM

Finland consistently produces students with the highest test scores in the world.

How did they they do it?

Some highlights:

http://www.projo.com/opinion/contributors/content/CT_gardner27_02-27-08_C48VQ4I_v12.39b8f4d.html

1) Education for its own sake:
"At the heart of Finland’s stellar reputation is a philosophy completely alien to America. The country of 5.3 million in an area twice the size of Missouri considers education an end in itself – not a means to an end. It’s a deeply rooted value that is reflected in the Ministry of Education and in all 432 municipalities. In sharp contrast, Americans view education as a stepping stone to better-paying jobs or to impress others. The distinction explains why we are obsessed with marquee names, and how we structure, operate and fund schools." ...

2) A powerful teachers' union and societal reverence for teachers:
"The scripted lesson plans that teachers here [in the USA] are increasingly being expected to follow would be rejected out of hand as an insult by teachers in Finland and by their powerful union, which has a growing membership of some 117,500 members."

3) Rejection of the fallacious (and pernicious and immoral) "business model" that is destroying our country:

"What ultimately emerges from studying Finland is the realization that the reform movement in America is based on a business model fundamentally at odds with the education model used by a country with the world’s finest schools. While it’s always risky to attempt to apply findings from one country to another, particularly when the two are so different, it’s a mistake to turn our backs on Finland’s approach."

Posted by harold | May 22, 2008 1:27 AM

How many of you would rather be working the night shift?

Posted by choice | May 22, 2008 6:30 AM

Oh, yeah, Finland, the country with the lowest percentage of immigrants in Western Europe.

Funny how that works ...

Posted by Steve Sailer | May 22, 2008 7:15 AM

Oh, yes, now immigrants make it impossible to educate people in our country. (Before that it was 5,000,000 displaced and destitute agricultural workers from Mississippi crowding our "inner cities") Whatever the reason, there is always an excuse (usually racist) for the taxpayers in the US not to invest in education.

Posted by harold | May 22, 2008 10:18 AM