Weekend Economists Down Under May 23-26, 2014

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42. The Economic Inequality Lurking Among The 99 Percent

http://thinkprogress.org/economy/2014/05/23/3441063/education-gap-inequality/

Debates on economic inequality over the past few years have focused on the growing divide between the top 1 percent of Americans and everyone else. Recent graphs even show that it’s the top 0.01 percent making the biggest income gains.

But a new paper looks at a larger divide, this time among the 99 percent: the education gap. “An exclusive focus on the concentration of top incomes ignores the component of rising inequality that is arguably even more consequential for the ‘other 99 percent’,” said David Autor, author of the study and an economist at MIT.

Autor found dramatic growth in the earning potential of people who get a college degree, which rose 20 to 56 percent in the last 35 years, accompanied by a large decline in the value of a high school diploma, which fell 11 percent. The result is an earnings gap between the two groups that has grown four times greater than the income shift to the top 1 percent since the 1980s.

If the wealth gained by the top 1 percent between 1979 and 2012 was divided equally among the total population, each household would get around $7,100 each. But the gap in median earnings between households with high-school educated workers and college-educated ones has grown by $28,000 in the same period.