In both California and the nation, income inequality is at or near record levels. Educational attainment is by far the single most important determinant of an individual’s income. A key question, then, is whether improvements in educational outcomes can reduce inequality. In a recent commentary for EdSource, we conclude that increases in college completion will increase wages, but will not significantly narrow the income gap. Here’s why:
College graduates earn a lot more than workers with less education. For example, workers with a bachelor’s degree earn 57 percent more on average than similar workers with only a high school diploma. But the range in wages for college graduates is much greater than the range for less educated workers. For example, among workers with a graduate degree, the top wage earners (those in the 75th percentile) earn $33 more per hour than those at the bottom of the wage distribution (25th percentile). Wage gaps are much lower among less educated workers – only $11 among workers with a high school diploma. Moreover, during the past three decades wage gaps have increased dramatically among college graduates. The large and growing variation in wages among college graduates leads to higher inequality.
This does not mean we should abandon policies to increase college enrollment and completion. Inequality at relatively high wages is better than low wages for everyone, and improvements in educational attainment will lead to higher incomes on average. But don’t expect to substantially reduce income inequality simply by increasing the rate of college graduation.