Here is an excerpt from my New York Times column today:
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
Professors Goldin and Katz portray a kind of race.
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
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
Bottlenecks currently keep more individuals from improving their education…
Note that education is a fundamental issue behind the kinds of inequality we should worry about most, namely the failure of many poor people to do better over time. It is not the fundamental problem behind every kind of measured inequality, as the column itself explains. It does not, for instance, explain rising gains to the top one percent. Inequality debates too often conflate different phenomena.
Here is a non-gated version of the very interesting Goldin-Katz paper which I cover.
In a dynamic era does educational access have much of a chance of keeping up with technological improvement? Even if we had optimal educational policies, which of course we don’t, modern technology goes "whoosh," education often just pokeys along.
Brad DeLong offers related commentary, though I think he is too quick to accuse Becker and Murphy of confusing the Marshallian scissors. Mark Thoma offers commentary and relevant links. Concerning Krugman’s claims, in general the data (see David Card’s Econometrica 2001 piece, plus the work of James Heckman) still find relatively high returns to additional education.