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Do Not Pass Go: The Impact of Education on Income Inequality

Opinion | February 16, 2015

Over 80 years ago, Charles Darrow, along with millions of other Americans, lost his job following the Stock Market Crash of 1929. At this time, the nation faced the highest peak of income inequality in the history of the United States of America: the richest 1 percent of Americans held about 18 percent of the national income. Darrow sought to create a board game that gave everyone a chance at achieving social and economic mobility. His game, Monopoly, became an American emblem, transporting households into a temporary world of capitalist competition in which each player shares equal initial income and has the agency to conduct and profit from their investment decisions.

As Monopoly gained popularity, the Depression ended and the Great Compression followed, an era in which the wealth gap dramatically shrunk and wages grew at a healthy rate. The United States’ Gini coefficient—the measure of wealth distribution—shrunk dramatically, proving that income inequality was decreasing.  More Americans were attending college, and as a result, wages were expanding at a rate correlated to increased productivity levels. The 1 percent’s share was dwindling and the middle class was expanding. It was as if on the Monopoly board, the top 1 percent of players began to lose their large share of properties, and the middle percentage of players—the middle class—began to expand their share.

Darrow never lived to see what would happen next: the Great Divergence, a term coined by journalist Timothy Noah in 2010. In 1979, the increase of low- and middle-income wages came to a sudden halt. The top Monopoly player started to once again gradually surpass the other 99 players and has been racing far ahead ever since. Today, the top player now dominates a quarter of the board’s entire income. While a variety of experts reasonably attribute the Great Divergence to the anti-income tax position of Reagan’s administration, the dramatic surge in corporate profit, and the United States’ expanding trade with low-wage nations, the United States is sweeping one protruding issue under the rug.

Over the past 30 years, the United States’ public educational system has failed to foster a supply of well-educated workers at a rate consistent with technological advancement, the primary factor dictating job skill requirements. As a result, the few highly and adequately educated workers have been filling a gaping job demand, and their income growth has been increasing at a much faster rate than the majority of medium- and low-skilled workers.

Still, Americans are surely becoming more educated. As President Obama asserted in the State of the Union address this January, more Americans are graduating from college than ever before. The problem, however, as journalist Timothy Noah addresses in his essay “The Great Divergence,” is that Americans aren’t getting smarter quickly enough. More Americans are attending college and the gross amount of American graduates is rising, but this is not an outstanding achievement for any democratic industrialized country. Furthermore, partly because of increased college fees and the prospect of crippling debt, only 53 percent of American college students are actually graduating from college. This rate is well under that of the Great Compression. In other words, Americans are gaining more access to college, but they are not sufficiently prepared to graduate.

While 40 years ago during the Great Compression a high school diploma could securely ensure graduates positions in the middle-class, today the equivalent could land the same candidates spots in the Supplemental Nutrition Assistance Program (SNAP). According to US News, the average income of a high school graduate is $28,000, which would make a family of four eligible for government assistance. An undergraduate degree, which brings the average income to $45,000, now barely gives one a competitive edge, nor does it provide the skills necessary for growing job demands.

Wages among the bottom 70th percentile of Americans are stagnated at an unprecedented rate. An NPR study reports that households led by high school graduates and college graduates who maintained an average income relative to their degrees have actually seen their incomes fall within the past few years. As one might predict, the only households that saw healthy wage increases were those led by college graduates who had already maintained exceptionally high incomes.

This phenomenon is termed “hollowing out of the middle.” Essentially, the rapid surge in technological advancement along with the integration of global economies has decreased the abundance of middle-skill and middle-income jobs while leaving available many low-skill and low-income jobs. Subsequently, Noah argues, large wages are reserved for workers educated on how to effectively put their “skills to technology and profitable use.”

One of the largest problems in American education is the failure to provide the skills relevant to current job demand. In the past, educational institutions emphasized specialization of skills based on respective labor demands. A more standardized and diluted curriculum governs the majority of public schools today. While the job skills demanded in an evolving marketplace are rapidly changing, American schools and curriculums do not speak to this need.

Furthermore, primary and secondary schools are leaving many children ill-equipped for college. And those who are prepared for college still have to face one of America’s largest catastrophes: uncontrollable, inflated college tuitions, which have been on the rise since the 1980s. This national calamity creates massive obstacles for a huge portion of lower- and middle-income students, and separates them further from the pool of applicants who can successfully pay their way through college and satisfy the demand for high skill jobs. Indeed, the odds are definitely not in favor of the large majority of our Monopoly players.

The government must reform the national public education system in order to help relieve income inequality.

Reform will be hard to achieve, considering a plethora of political boundaries.

To begin, educational reform would require wealth distribution through increased taxation of the upper class. Education is an investment in our future, but this is always a contentious topic within the government. Furthermore, educational reform requires many years to see any noticeable effect. As a result, many politicians are deterred from addressing deeply rooted systemic issues and attempt to find quick and easy solutions.

The United States cannot keep ignoring the enormous problem of income inequality. To address this issue, politicians must look beyond their personal and political interests in order to benefit the collective whole. Ultimately, adequate and high-level education can give millions of Americans the opportunities they deserve to have a fair fight in the global marketplace, and help move towards the goal that Charles Darrow had always envisioned: giving an equal opportunity to all players on the board, no matter their starting position.