Obtaining more education is probably the single most valuable thing most people can do to get ahead economically. But it’s less clear that more education, absent other changes, guarantees more broadly shared prosperity for American society overall.
That’s one of the many provocative conclusions in the Economic Policy Institute’s latest “State of Working America” report released this week. EPI’s policy agenda leans left, but the group’s analytical rigor is unquestioned. Its encyclopedic report, now in its 12th edition, does for economics what Bill James’s groundbreaking yearbooks did for baseball: It deploys statistics in imaginative ways that create new means for understanding seemingly familiar patterns.
One subject that benefits from that treatment is education. Leaders in both political parties have long argued that equipping more Americans with two- or four-year college degrees is the best way to reverse the generation-long slowdown in the growth of living standards. But by tracking trends in employment, wages, and mobility, the report offers a more equivocal verdict on the power and limits of education to expand opportunity.
On the one hand, the study documents the many benefits that accrue to workers with more schooling. In 2011, employees with a four-year college degree earned about 75 percent more in hourly wages than high school graduates. Workers with postgraduate credentials earned 30 percent more than workers with a four-year degree. The 2011 unemployment rate for college graduates (5.2 percent) was less than half that for people with a high school diploma (11.1 percent). Education clearly provided some shelter from the gales of the Great Recession and its aftermath.
Education remains central to individual upward mobility as well. Only about one of six children born to parents in the bottom fifth of the income distribution remained there as adults if they obtained a college degree, the report concludes. By contrast, nearly half of the children of low-income parents who don’t complete college remain stuck on that bottom rung.
Another revealing analysis shows how thoroughly the top income brackets have become a kind of alumni club. As recently as 1979, workers without a four-year degree accounted for just over half the hours worked by people at the pinnacle of the economic ladder—those in the top 5 percent of all earners. By 2007, workers with at least a four-year degree accounted for nearly three-fourths of the hours worked by people at the top.
In all of these ways, acquiring more education remains “a solution from the point of view of an individual person or a family,” says Larry Mishel, EPI’s president. But, he argues, “it’s not necessarily a solution for the working class” overall. Those with more education have fared better during the Great Recession—and the longer-term slowdown in income gains that preceded it—but they haven’t been immune to the trends that have strained noncollege families. Although workers with college degrees still earn much more than those without them, hourly earnings for those well-educated workers are no higher now than in 2000. No parent with a freshly minted college graduate living at home will be surprised to hear that starting salaries for those new degree holders are lower today than in 2000. “We know that there are a lot of people with a college degree working with jobs that don’t require [it],” Mishel says.
The other problem with a strategy that relies primarily on education to expand opportunity is that access to advanced learning now does as much to stratify privilege as to dissolve it. Almost all of the gains in college completion since the 1970s have occurred among children from families near the top of the income ladder. Children whose parents obtained college degrees are nearly five times more likely to complete college themselves than are children whose parents did not. Children from low-income families who score highly on eighth-grade math tests are slightly less likely to complete college than children from high-earning families who score poorly on those same tests.
In every way possible, public policy should work to close those gaps, which mock America’s self-image as a land of universal opportunity. But adding more college graduates to an economy generating jobs this slowly, Mishel says, might produce only “substantially lower wages” for them. One of the report’s most important findings is that the rapid job growth and minuscule unemployment rate under President Clinton during the late 1990s produced the closest thing in recent times to the broadly shared income gains that the U.S. enjoyed in the first 25 years after World War II.
By contrast, the authors project that at current rates of job and income growth, the median income for working-age families won’t regain its 2000 level until 2018—meaning that those families will face two lost decades. Education remains essential to helping more young people realize their full potential. But the EPI report powerfully reminds us that a society that works for all Americans won’t be possible again until many more Americans are working.
This article appeared in the Saturday, September 15, 2012 edition of National Journal.