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College Degrees and Inequality

A new study simulated the effects of a bachelor’s degree on the population of men 25 to 64 who do not have one.  The study argues that better education would lift earnings of men in the bottom half of the pay scale, but would only marginally affect the gap between rich and poor.  Income inequality and wage stagnation have been popular topics of conversation among academics and policy makers recently.  Average incomes of the wealthiest 1% have dramatically outpaced everyone else, but steady job creation has not led to higher pay for most workers.  While the study argues that increasing the skills of those in the lower half of the income distribution will improve their economic position, their exercise looks at low skill men, a group which has seen a heavy drop in employment and earnings in recent years.  The simulation suggests a bachelor degree would lift the lowest 25% annual earnings to $8,720 from $6,100, and closer to the middle of the pack annual earnings to $37,060 from $34,000.  While the boost would be nice for those wage earners, it would only be a marginal improvement in terms of income inequality.  What do you think about college degrees and income inequality?

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  1. maguirem15 maguirem15

    I think it is beneficial to have a college degree because it is raising wages even though it is by a minimal amount. It would be interesting to see the breakdown on how different degrees are raising income as well.

  2. deplautt deplautt

    I agree that it definitely depends on the type of bachelor degree as various majors can have drastically different wages. Additionally while it may only be a marginal improvement in terms of income equality it is a step in the right direction to better the quality of life for people who are able to increase wages.

  3. deplautt deplautt

    There is also the worry that the increase in wages may not be worth it currently with the high cost of higher education. There needs to be a better way to increase quality of life for those in the lower percentages to help solve the vast income equality in the United States.

  4. klinedinstc15 klinedinstc15

    I agree that it is definitely worth pursuing better and more education for the bottom half, despite the earnings differential being just a marginal amount. I think it will improve their opportunities and potential enough that it makes it worth it. Obama’s education plan regarding free tuition at community colleges could help with this.

  5. moorem15 moorem15

    I agree with what has been said so far. I think it’s necessary to point out that there already exists a college degree surplus in the economy- more people have college degrees than jobs that require one. I think there is an opportunity to increase workers’ skills, but maybe through alternative methods.

  6. Christian von Hassell Christian von Hassell

    I think that we might see an strong increase in alternative routes to a successful and lucrative career. Technical training is increasingly needed, very lucrative, and attained without many portions of a college degree. As skills become more quantifiable, we will also place less dependence on credentials like degrees and more on what you actually can do, build, fix, or code.

  7. grieve grieve

    Coding is becoming increasingly important and lucrative, so I agree with christian that acquiring technical skills and skirting the college path may increase.

  8. Lots of issues, but in the background is the macro one of weak job creation relative to the number of people who lost jobs in 2007-2010. That followed years of overall slow job creation, essentially from 2000 on.

    As to education, it’s partly a signal. The more who have a degree, the less information a degree conveys about diligence (sticking-with-it-ness) and ability. It’s a signal in part because it’s costly. But the decision making on whether to invest in that signal of a BA is imprecise and backward-looking, so it may be that too many people spend too much money on college degrees.

    In the short run there’s a correlation between majors and income. Does that in fact hold over the long run? I’m not so sure, Americans typically have more than one “career” during their working life.

  9. winn winn

    Similarly to Christian’s comment, I wonder what the effect that a community college degree has on income for the same age bracket. For many, it may be more cost effective.

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