A few weeks ago, I had the great pleasure meeting a brilliant German scholar who was around my age. At one point he mentioned that his parents hadn’t finished high school, which wasn’t at all uncommon in their generation.

This reminded me of an interesting fact about college completion rates in the United States, which Tamar Lewin cited in the New York Times in July:

Mr. [William] Kirwan said that the United States had fallen behind other countries over several decades.
“We led the world in the 1980s, but we didn’t build from there,” he said. “If you look at people 60 and over, about 39-40 percent have college degrees, and if you look at young people, too, about 39-40 percent have college degrees. Meanwhile, other countries have passed us by.”
Canada now leads the world in educational attainment, with about 56 percent of its young adults having earned at least associate’s degrees in 2007, compared with only 40 percent of those in the United States. (The United States’ rate has since risen slightly.)

In The Race Between Education and Technology, Claudia Goldin and Lawrence Katz make a related observation: though college-going rates among 20 to 24-year-olds have increased from 44 percent in 1980 to 61 percent in 2003, college completion rates haven’t increased concomitantly, thus suggesting that U.S. higher education dollars aren’t being deployed terribly well.

Because education continued to advance in Europe precisely when it lagged in the United States, wage inequality should have increased far less in Europe than in the United States. That is precisely what happened. Even though wage inequality has increased in most OECD nations since 1980, the increase was greater in the United States.

Tyler Cowen, citing Thomas Lemieux, has observed that “there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary,” thus complicating the picture.

This leads me to Lane Kenworthy’s fascinating presentation on living standards for middle-income households in the United States. He notes that while median household income has decoupled from growth in GDP per capita in the United States since 1975, they’ve tracked more closely in Sweden and the United Kingdom. Kenworthy’s implication appears to be that policy interventions could have made a significant difference.

Kenworthy could be right. It is worth noting, however, that while 39-40 percent of U.S. 60-year-olds have completed college, the number of Swedes with a tertiary degree was far smaller. As Tyler might put it, the Swedes had far more “low-hanging fruit” to pluck. As Tino Sanandaji suggests, demographic change in the U.S. may have contributed to the slowdown in educational attainment. Moreover, median household income and GDP per capita have been coupled at lower levels than what we see in the United States.

Could it be that decoupling becomes more likely at higher levels of GDP per capita in diverse societies? The gap in educational attainment between non-Hispanic white and Asian-origin children on one side and black and Latino children in the U.S. is large, but it is as large or larger between European-origin children and children from North Africa, the Afro-Caribbean, and South Asian Muslim backgrounds in the rest of the OECD. It is a commonplace that the main driver of wage dispersion in the U.S. has been the dramatic growth in income gains to those in the top 1 and top 0.01 percent.

When people suggest that rising income inequality plus growth in GDP per capita is “better than the alternative,” Kenworthy implicitly tells us that the alternative is Sweden or the United Kingdom. But of course Sweden and the United Kingdom are different: they started out with less educated populations. The alternative for the U.S. might not have been Sweden or the UK, but rather rising income inequality plus sluggish growth in GDP per capita.

I’m also intrigued by the role of relative rates of urbanization. As of 2008, the U.S. was 82% urbanized against 85% in Sweden and 90% in the United Kingdom. Remember that both of these countries are poorer than the U.S. in terms of GDP per capita. Edward Glaeser has famously found that wages and productivity rise with density.

The figure shows the 25 percent correlation between the logarithms of population density and 2008 gross metropolitan product per capita (using 2000 Census population numbers). Per capita productivity increases by 4 percent as population density rises by 50 percent.

Though both Sweden and Britain have empty expanses, both countries have thickly settled regions in which one metropolitan area bleeds into the next, with fairly good transportation links. Given the nontrivial role played by transportation costs in the budgets of middle-income U.S. families, one wonders if a stronger focus on intrametropolitan mobility might be a good way of enhancing our growth prospects while bettering the lives of those of modest means. This is much easier said than done, of course.