In the Washington Post today, Sebastian Mallaby suggests that the key to solving America's income inequality problem is
Now, you want to hear something really bad? The poorest fifth of Americans has experienced a rise in incomes of just 3 percent over the past three decades. The real problem in America is not about the middle class. It's about the underclass; about Americans who lack the skills and habits to advance at all.
Now it is true that workers with less education have fared much, much more poorly over the past few decades. According to the Economic Policy Institute's ever-useful The State of Working America, from 1979-2000 real hourly wages declined by 1 percent for those with less than a high school education and 0.1 percent for those with only a high school diploma. (Wages climbed, albeit grudgingly, for those with some college, a college degree, or an advanced degree.) So Mallaby's claim seems plausible enough on the surface. The usual story proffered here is that the rapid technological transformation in America has meant that too many unskilled workers can't meet the demand for high-tech know-how, and hence, are being left behind. If we could only train these workers, the story goes, they could hop on the high-tech space-wagon and reap the massive returns of the knowledge economy. Then there would be candy for everyone.
It's an elegant story, sure, but it's probably not true. For one, according to the EPI book, the timing and rate of technological innovation don't quite line up with the rise and pace of income inequality. During the late 1990s, remember, a writhing, thrashing technology boom was sweeping the nation, but that was precisely the period of time when hourly wages were finally rising for the uneducated, and wage inequality was decreasing between groups of different education and experience. That doesn't quite jibe with Mallaby's story, eh? Second, according to EPI, over half of the growth in income inequality has occurred within groups of roughly similar education and experience. The gap between the educated and uneducated doesn't line up with the gap between the haves and have-nots. Many educated workers have been losing out too. How would more schooling alone solve that problem?
Meanwhile, it's not at all obvious that high-tech, high-skilled jobs are the only ones being created in this new economy: the demand for low-wage, de-skilled jobs is still quite high. A study by economists Frank Levy and Richard Murnane has noted that both types of companies exist: "Some firms may choose to compete for larger shares of standardized products produced by low wage workers carrying out relatively simple tasks. Other firms may choose to tailor production to a high value-added, high quality product at the upper end of the market." Not to mention the fact that there are a whole host of low-skill service jobs that simply aren't going to disappear anytime soonwho's going to serve coffee at Starbucks? who empties the trash? who mops the floor?and there's no reason to think that improving education will automatically improve working conditions for these particular workers. Something else needs to be done, whether that's strengthening unions, boosting the minimum wage, pursuing full employment policies, or some other measures. Education's a laudable goal, and I'm all for it, but education alone won't fix the worker inequality problem.