A WORLD OF PHDs. Federal Reserve Chairman Ben Bernanke seems to think that increasing education is the miracle wand which will keep rising income inequality in this country within "acceptable" bounds. Why? Because of this:
But now for the bad news: inequality also continues to widen. In real terms, Bernanke pointed out, the earnings at the 50 th percentile of the distribution, referred to as the median wage, climbed about 11.5 percent between 1979 and 2006. Over the same period, the wage at the 10 th percentile, near the bottom of the wage distribution, Bernanke noted, rose just 4%, while the wage at the 90 th percentile, close to the top of the distribution, increased 34 percent.
Average education levels rise as we move up the income distribution, true, and perhaps policies aimed at raising that average would work. Or so Bernanke argues.
But note the very rapid rise of the earnings at the narrow top of the income pyramid, a top narrower than the share of the educated in the overall population. And take a look at Brad DeLong's graph on further evidence that something else, something in addition to education, is affecting the rising income inequality. And then ask yourself this question: Will the more educated still be protected from the ravages of globalization when a corporation can hire a replacement for an engineer, say, at one tenth of the domestic wage rate?
I think we should keep all the potential tools in our toolkit, including changing tax policies, if we really want to address the inequality of the income distribution and its causes.