Why inequality is about education

Inequality is increasing almost everywhere in the industrialized and postindustrial world.  The increase has been the greatest in the United States.  What's to blame for the widening inequality?

Education is part of the answer.  For all the talk regarding the inequality of the top one percent and the remaining 99 percent, the true gap is between the 45 million workers with a college education and the 80 million workers without one.  Our global "idea economy" combined with technological progress, globalization, outsourcing, and the shift away from traditional manufacturing industries have placed a premium on a college education.  Demand is up for engineers while the supply of unskilled jobs has declined.  The increasing gap reflects the growth in demand for college graduates with skills suited for a global economy (e.g., M.S. Computer Science from Stanford University) and the decline in traditional industries with unskilled labor (e.g., manufacturing and housing).

Consider Master Lock.  Its Milwaukee plant is operating at capacity for the first time in 15 years, before is started  sending work overseas.  It is producing much more stuff than it did back then.  But is is doing so with 412 workers - about 750 fewer than it had 15 years ago.  Or consider the case of Germany's Stihl in Virginia Beach.  The plant has 120 robots that run around the clock every day, with only seven workers on each shift.  Next year, the company plans to spend $10 million for machines and software that will allow the plant to double its output.  It will only need six more workers to do that.  Read that carefully again - - and remember that the annual compensation of the average employee at Microsoft is $170,000.

The following data by Enrico Moretti in The New Geography of Jobs may not be the complete story, but it is a large part of the book.  The data is the hourly average wage of men by education in 2011 dollars for all full-time workers aged 25-60.  The data is summarized in the following format - - 1980/2010/Percent Change (Note - the CPI averaged 3.21% annually during this 30-year period) - -

Dropout - - $13.7/$11.8/-14%

High School - - $16.0/$14.8/-8%

College - - $21.0/$25.3/+20%

Advanced Degree - - $24.9/$33.1/+32%