Wednesday, November 2, 2011

Education & Income in America

Poor Paul Krugman. He is trying to fight the noise machine that the political right in the US uses to fool people into voting for Republican "ideas".

Here is a post in his NY Times blog pointing out that income is only loosely tied to education. The real big bucks are going to a tiny 0.1% elite who have a stranglehold on the economy (and politics):
A Mind Is A Terrible Thing To Lose

OK, I see that some people are doubling down on the claim that rising inequality is all about education — when what the CBO report drives home is that this is all wrong, the big increase has come from gains at the very top. I have to admit that I have a sneaking suspicion that this is in part driven by KDS (DS for derangement syndrome): some people will rush to take a position precisely because I have debunked it. But anyway, it’s really, really wrong.

Here’s the CBO result:

Click to Enlarge

Notice that the 81-99 percentiles have seen only modest gains; it’s really the top 1 percent that drives the story.

For comparison, here’s some data on wages of men by education from EPI:

Click to Enlarge

Not the perfect comparison, but good enough. Notice the difference in scales. College graduates have made only modest gains, and basically nothing after 2000; even advanced degrees weren’t giving anything like the gains we see for the top 1 percent (and the much bigger gains of the top 0.1 percent).

Yes, college grads have done better than non; but inequality in America is mainly a story about a small elite pulling away from everyone else, including ordinary college grads. And we’ve know this for a long time! There is no excuse for getting it wrong.
There is a modest effect of more education leading to more income. But that is swamped by the effect of being in the top 0.1%. I'm sure the top 0.1% have wonderful college degrees, but the degree isn't what makes them the money. It is the fact that they are in an elite position which lets them milk the system for the really big bucks.

The Robber Barons of the past didn't make their big money because of advanced degrees. They made it because they found ways to get a stranglehold on some key point in the economy and extort big bucks for themselves.

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