Economic Research: How Increasing Income Inequality Is Dampening U.S. Economic Growth, And Possible Ways To Change The Tide
Chart 3
Ratios Of Median Net Worth Relative To Median Net Worth Of A High School Graduate
No high school diploma Some college, no degree Associate degree Bachelors degree
— — Graduate or professional degree
1993 2000 2002 2004 2005 2009 2010
Note: High school graduate net worth = 1. Source: U.S. Census Bureau, Survey of Income and Program Participation 2004 and 2008 panels.
© Standard & Poor's 2014.
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Harvard professors Claudia Goldin and Lawrence Katz argue that, rather than technology picking up speed, the reduced supply of educated workers is the key factor explaining the education gap, finding that between 1980 and 2005 the pace of the increase in educational attainment slowed dramatically. In 1980, Americans age 30 years or older had 4.7 years more schooling on average than Americans in 1930--but Americans in 2005 had only 0.8 years more schooling on average than Americans in 1980 (24). Based on this data, it would appear the problem isn't that
technology has leaped ahead--rather, the supply of educated workers has stalled.
The impact of income inequality on future generations of qualified workers is particularly disconcerting. Michael Greenstone, Adam Looney, Jeremy Patashnik, and Muxin Yu (Hamilton Project-Brookings) examined the effect that the income divide in the U.S. could have on the future upward mobility of the country's children (25). They found that investments in education and skills, traits that increasingly decide job market success, are becoming more stratified by
family income, threatening the earning potential of the youngest Americans.
These researchers note that, although cognitive tests of ability show little difference between children of high- and low-income parents in the first years of their lives, "large and persistent" differences start to appear before kindergarten and widen throughout high school (26). Indeed, researchers have found that the gap in test results of children from
families at the 90th income percentile versus children of families at the 10th percentile has grown by about 40% over
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