Our book shows that the educational slowdown caused much of the recent rise in economic inequality. Similarly, the large increase in educational attainment earlier in the twentieth century produced greater economic equality and shared prosperity. Slowdowns and speedups in skill-biased technological change are far less important in accounting for the large swings in inequality than changes in the supply of skills. The rise and decline of unions plays a supporting role in the story, but it is rarely a major player. Immigration and international trade also do not play starring roles in explaining changes in economic inequality.
A sharp slowdown in educational attainment and high school graduation rates occurred for those born after 1950. College graduation rates began to slow and high school graduation rates hit a plateau. Once the world leader in high school graduation, the US has fallen in recent years to nearly the bottom of OECD nations; while it is still a leader in college attendance, college completion rates for recent cohorts are lagging other nations.
We also consider two auxiliary factors – unionisation and immigration trends. A simple calculation shows that declining unionisation can account for only 3 log points of the 23 log point college wage premium increase. The other factor is immigration. Because immigration increased greatly after 1970 and a large fraction arrived with little education, the recent sluggishness in education could be due to immigration. But it is not. The native-born population can be held accountable for most of the slowdown in college and high school graduation.
These thoughts were laid out in the authors’ book The Race Between Education and Inequality, which came out last year. Earlier this year, economists Arnold Kling and John Merrifield wrote a critique [PDF] of the book that praised its conceptual framework but criticized its policy recommendations. To wit:
Our criticisms include the following: We see a need to distinguish between attending school and becoming capable or skilful; We criticize the way that Goldin and Katz talk about “years of schooling” as a continuous variable, when the underlying phenomenon is that the combination of high school graduation rates and college attendance rates increased more slowly after 1970 primarily because of a slowdown in the former, a slowdown which was arithmetically driven by the fact that high school graduation rates can only go up to 100 percent; We criticize the way they break up time periods in a way that buries the productivity acceleration of 1990-2005 . This acceleration is more consistent with the view that technology surged ahead than with the view that growth in skills fell off. We see a need to recognize the profound institutional changes that occurred during the twentieth century, for their consequences can help to explain why the populations’ skills are not “keeping up” with technology. Goldin and Katz suggest policy changes to improve modal skills by way of increasing the number of quality-maintained college graduates, and we suggest that they do not give us reason to believe that such an increase is viable, particularly by the means they suggest.
Whereas [Goldin and Katz] prescribe more governmentalization, we diagnosis over-governmentalization and would prescribe the de-governmentalization of education.
It all makes for interesting reading on a Friday afternoon. Via Freakonomics.