November 12, 2013

The missing I-word in the inequality mystery

From the NYT:
Rethinking the Income Gap and a College Education 
By EDUARDO PORTER 
... Still, the growing skepticism about the value of a [college] degree has fed into a deeper unease among some economists about the ironclad trust that policy makers, alongside many academics, have vested in higher education as the weapon of choice to battle widening income disparities and improve the prospects of the middle class. 
It has given new vigor to a critique, mostly by thinkers on the left of the political spectrum, that challenges the idea that educational disparities are a main driver of economic inequality. 
“It is absolutely clear that educational wage differentials have not driven wage inequality over the last 15 years,” said Lawrence Mishel, who heads the Economic Policy Institute, a liberal-leaning center for economic policy analysis. “Wage inequality has grown a lot over the last 15 years and the educational wage premium has changed little.” 
The standard analysis of the interplay between technology and education, developed by economists like Lawrence Katz and Claudia Goldin of Harvard, and David Autor of the Massachusetts Institute of Technology, is based on a simple proposition: technological progress increased the demand for highly educated workers who could deploy it profitably, increasing their incomes. Like trade, it rendered many less-skilled occupations obsolete, eliminating what used to be solid, middle-class jobs. 
This rendition of history suggests that improvements in technology from the PC to the Internet — coupled with a college graduation rate that slowed sharply in the 1980s — have been principal drivers of the nation’s widening income gap, leaving workers with less education behind. 
But critics like Mr. Mishel point out that this theory has important blind spots.
For instance, why have wages for college graduates stagnated over the last decade, even as innovation continues at a breathtaking pace? Between 2000 and 2008 the typical earnings of men with at least a bachelor’s degree fell by more than $2,000, after inflation, to $70,332 a year. Between 2008 and last year they fell a further $3,500. Though somewhat less pronounced, the pattern is similar for women. 
Both sides agree that the overall weakness of the job market since the turn of the millennium is a prime culprit. As Professor Katz noted: “The only moments we’ve had of broadly shared prosperity have been in tight labor markets.” 
Still, the sluggish job growth of the last decade – following the rapid expansion during the second half of the 1990s — demands an explanation, which the interplay between technology and skill does not provide. 
“We have no handle on what happened in the 2000s,” Professor Autor told me. 
“That is a mystery that nobody I know understands, and I can’t point to a single policy lever or a single external force that would explain it.”

Try to guess what word is completely missing from this article and from almost all respectable thinking about this mystery.

19 comments:

Morgan F said...

Intelligence
IQ
Intellect

Innate
Inborn
Inherent
Intrinsic

Inherited

Morgan F said...

Intelligence
IQ
Intellect

Innate
Inborn
Inherent
Intrinsic

Inherited

Anonymous said...

So the minimum wage is why the working class aren't seeing income gains? Are these guys serious? What about immigration?

Antioco Dascalon said...

“The only moments we’ve had of broadly shared prosperity have been in tight labor markets.”

Sooo close!

"Tight labor markets are obviously the result of limiting the supply of labor, so the best way to ensure prosperity for American workers is…"

Alert! Alert! Mandatory derailing of train of thought! Alert! Alert!

"So, The Tea Party is soooo racist, amirite?" "Miley Cyrus's tongue. What's that about?"

Whew… Crisis averted.

SFG said...

You HBD types are way too fond of intelligence. It explains a lot about racial (and gender) disparities, but the screwing of the middle class has to do more with globalization and decline of the unions. Programmers are smarter than lots of people, and they're getting screwed. Are investment bankers that much smarter than the rest of the population?

Anonymous said...

Oh for heaven's sake! Immigration!
Robert Hume

heartiste said...

Interesting

Anonymous said...

“Kids should still go to college, and when a whole lot more do we’ll have more opportunity,” he said. “But college wages will fall,” he added, as the supply of graduates increases.

Well that's a positive. Here we have in the MSM press an acknowledgement that the laws of supply and demand ALSO apply to the labor market.

True immigration is not mentioned. But in many of these articles immigration is always offered as the cure to our ills. So neglecting to mention it, is sort of a positive.

Anonymous said...

As a demographer/social statistician I can think of half-a-dozen words/phrases left out of these analyses, including age, cohort effect, college major, and Griggs v Duke Power. Let's start with Griggs v Duke Power. When an idiot judge decided that unequal racial outcomes on employment tests were prima facie evidence of racial discrimination, employers were forced to develop alternative methods to amke sure that stupid and feckless persons were not hired for positions where they could cause enormous damage. Requiring a college degree became the standard method. This meant thyat anyone seeking a job that had once required only a HS diploma now needed to pay for and obtain a BA degree. The vast majority of these new recruitys to higher education really weren't qualified and wound up getting dumbed down degrees in economically useless -- and evewn economically harmful -- majors like sociology and gender and race/ethnic studies. These newer cohorts of college graduates are naturally going to earn less than their more qualified counterparts who also tend to have hifgher wages just as a result of skills and experience gained by long tenure in the labor force. These circumstances alone are more than enought to expalin the recent apparent stagnation and decline in average wages among the "more highly educated".

Jeff W. said...

Education, like snake oil, has been sold as a cure for many ills: poverty, crime, racial inequality, income inequality, economic uncompetitiveness, bad voting decisions, bad political decisions, a vulgarized culture, superstition and backwardness, racism, misogyny, homophobia, bourgeois attitudes and lifestyles, lack of proper physical exercise, poor food choices, and communicable diseases.

It works about as well as snake oil.

Anonymous said...

Teacher! Leave those kids alone!

Auntie Analogue said...


H-1Bcalifragilisticexpialidocious?

Mountain Maven said...

“We have no handle on what happened ...That is a mystery that nobody I know understands..."

So a bunch of PhD economists pretend they are too stupid to understand the basic workings of the economy and the labor market.

This is the Obama defense, ignorance

Are they really stupid and ignorant? It's Crimestop (1984)

Apparently it's better to be stupid than not PC

Anonymous said...

But still the fox news was supporting immigration.

Alice said...

The Goldin Katz book was so annoying.

Before they get to anything as interesting as ignoring immigration, they were even dumber.

their argument was all based on earned income gaps over the last 100 years and discussed the "best" times were when the income inequality was minimized, which was almost always shown by caps on the maximums earned, but Without Ever Considering or even once Mentioning Anywhere tax rates.

Not once! they didn't even bring it up to dismiss it! it never occurred to them that perhaps sky high marginal tax rates led to a Galt effect in earned income!

So after that, it was difficult to take seriously anything they said, even before they ignored reality.

Anonymous said...

For instance, why have wages for college graduates stagnated over the last decade, even as innovation continues at a breathtaking pace?

In the marketplace of goods and services - pay to produce those goods and services has to be in direct proportion to how the goods and services are valued in the market place.

The short answer is that these collage grads are producing less then their predecessors.

The real answer is that the intellectual rigor of a collage education is falling.

Being a capable person requires some natural abilities and a good nurturing (i.e., a good education).

It is hard to think that these current grads are dumber then their predecessors - so it must be the education system that is failing. We all know that to be true!

For instance, why have wages for college graduates stagnated over the last decade, even as innovation continues at a breathtaking pace?

In the marketplace of goods and services - pay to produce those goods and services has to be in direct proportion to how the goods and services are valued in the market place.

The short answer is that these collage grads are producing less then their predecessors.

The real answer is that the intellectual rigor of a collage education is falling.

Being a capable person requires some natural abilities and a good nurturing (i.e., a good education).

It is hard to think that these current grads are dumber then their predecessors - so it must be the education system that is failing. We all know that to be true!

For instance, why have wages for college graduates stagnated over the last decade, even as innovation continues at a breathtaking pace?

In the marketplace of goods and services - pay to produce those goods and services has to be in direct proportion to how the goods and services are valued in the market place.

The short answer is that these collage grads are producing less then their predecessors.

The real answer is that the intellectual rigor of a collage education is falling.

Being a capable person requires some natural abilities and a good nurturing (i.e., a good education).

It is hard to think that these current grads are dumber then their predecessors - so it must be the education system that is failing. We all know that to be true!


p.s. Is the problem a weak curriculum that lacks rigor?

Anonymous said...

In order to be truly independent and wealthy, one must really look outside the box, and forget the college to "American Salaryman" route of the 1980s.

Dai Alanye said...

Immigration certainly, but also policies that encourage (or allow) importation of the vast majority of consumer products, and a policy of generous government subsidies,including extended unemployment payments.

Wall Street makes money with the assistance of QE, the public are anesthetized with bread and circuses, and immigrants are invited to do jobs that can't be shipped to Asia or that Americans supposedly won't do, while we sell bonds to nations that are eating our lunch. It's a great short-term scheme, but so was Carlo Ponzi's.

We need a hiatus on all immigration, a gradual reduction of anything smacking of government support for individuals and businesses, and tariffs or other import restrictions.

Anonymous said...


"The short answer is that these collage grads are producing less then their predecessors. "

This is outrageously untrue. Worker productivity in the United States has skyrocketed in the past few decades. Wages, however, have been stagnant.