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Home Publications Blogs Beat the Press Washington Post Reports That David Autor Needs to Read His Research on Inequality More Carefully

Washington Post Reports That David Autor Needs to Read His Research on Inequality More Carefully

Friday, 23 May 2014 04:44

The Post ran a piece highlighting research by M.I.T. economist David Autor that purportedly shows the wage premium earned by college grads is the main source of inequality in the economy today.This is presented as a counter to much analysis showing that the income gains of the richest 1 percent has been the major source of inequality. The data presented in the piece do not support Autor's claim.

In the case of full-time male workers, Autor's data show that full-time male workers with a college degree have seen an increase in real wages of just 3.0 percent from their peak in 1973 to 2012. This was a period in which productivity almost doubled. Women college grads did considerably better over this period, but even women with college degrees saw essentially no wage gain from 2001 to 2012, a period in which productivity increased by more than 25 percent.

Autor's data indicate that most college grads have not shared evenly in the economy's growth over the last four decades. The much smaller segment of the workforce with advanced degrees have done considerably better, but this puts the cutoff between winners and losers at advanced degrees and everyone else, not between college grads at everyone else.   

Comments (9)Add Comment
This is another bubble
written by Dave, May 23, 2014 7:00
There has been a growing education bubble for a long time. I can remember precisely what I was thinking in 2003 when I was made aware of the damage that would come from the deflation of the housing bubble. I started thinking about bubbles and realized that we had a lot of them. One that I identified at the time was the education bubble.

Education prices have skyrocketed while the return on investment in education has declined considerably. For this I site the many college educated people that do jobs outside their field of study and for a much lower wage than what they expected.

Much of this mindset emanates from one very influential NYT opinion writer, TF. So many people read his books and just took them as gospel. He had some interesting ideas, but many of them were just wrong. All he does is write out of common sense and wishful thinking. He doesn't analyze anything at all, so his conclusions are just wrong.

Higher education is not paying off very well, and the societal emphasis on higher education is doing harm. Of course most parents want their children to go to college, and many will benefit enormously. But as a general rule, everyone doesn't need to go to college. Not only are the costs bubbling out, the expectations are bubbling and doing damage.
Bait and Switch: It's Not About Their Money - It's About Money Never Seen by the 99%
written by Last Mover, May 23, 2014 7:33
By Autor's calculations, if you'd taken all the income gains that flowed to the 1 percent over the last 35 years and redistributed them evenly to everyone else in the economy, that would have delivered an extra $7,100 a year to every household in the bottom 99 percent. That's a lot of money. But it's not as much as the growing pay differential between workers who went to college and those who didn't.

This is a standard line pitched daily in various forms by sock puppets on behalf of economic predators who systematically destroyed America's economy for the last 35 years.

Note two critical assumptions, neither of which applies. One presumes the 1% actually "earn" their income through added value of productivity gains rather than failed markets steeped in market power designed to extract anti-competitive monopoly rent profit which adds no value.

The other presumes even if they earned it, there is no opportunity cost to the 99% for doing so. So there would be no trillion dollar output gap, no long term unemployed, no failed health care, no failed higher education, no failed internet, no crumbling infrastructure, etc.

The economic and political lock on the nation by predators within the 1% is complete. The failures are not a bug in an otherwise functioning economy. They are a feature by design of the 1%.

The American economy is essentially neofascist in structure, existing within an elaborate masquerade of "free market" farce designed to link in this case, higher productivity, added value and more income to more education, even more than that added by becoming a member of the 1% itself through a ridiculous calculation that doesn't include the elephant in the room.

David Autor and rest of the sock puppets spewing this drivel know well that the 1% (more accurately the .1% or .01%) who run the entire country from the top down, could actually be wiped off the face of the economy with campaign finance reform designed to restore working free markets rather than destory them.

Then the amount of money redistributed to the 99% from the 1% would pale in comparison to the value of net economic opportunity gained by the 99%.

Listen up America. It's not about the money per se of the economic predators compared to the money available from higher education or whatever. It's about campaign finance reform and the money never seen by the 99% under the "free market" farce that created the predators themselves.
Dave is spot on...
written by pete, May 23, 2014 9:54
The "college or fail" mentality is crippling, especially in the inner cities. There, lack of parental involvement in education and declining schools are simply devastating. We are left with what, 25% inner city youth unemployment? In other words, 25% of the inner city youth are not worth the admittedly low wages that are offered. Instead, our European and Asian counterparts, so often lauded for their forward social thinking, separate the college bound from others quite early, leading to very productive and more highly paid workers. Sigh.

A correction for Dean. His use of productivity is to take total output divided by number of workers, I assume. Thus, it is not the productivity of a worker, but the productivity of a worker combined with some capital. Thus, when a gardener gets an electric lawnmower and can mow two lawns per hour instead of one, who gets credit, the gardener or the owner of the mower? It is not at all clear that the gardener should get 2X the pay.
written by James, May 23, 2014 1:04
As owner of lawnmower, I stared at them with X-Menn power and yet they don't F... move. My well-manicured neighbors complain to the city who threatened to fine me.

I then had to pay some cheap labor from local Homedepot to MOVE my mower.

Told them they are lucky to get paid from me bc I am the owner and without MY machine, they cannot do anything. In fact, they should pay me to manicure my yard.

Also told themm they are lucky bc I could get cheaper labor if I go further south to the border and millions of people are despearte to come over just to manicure my grass as well.

Colleges are pricing their product for the perceived "value"
written by John Wright, May 23, 2014 2:59
Value based pricing is used by companies when they have a product that has high perceived value.

So rather than pricing relative to manufacturing cost, the price of the product is set relative to perceived value.

Unfortunately, the US government and Very Serious People have promoted college as the only way to "get ahead".

And colleges have priced this "ticket to the middle class" for this perceived value.

Meanwhile, tech companies have seen that their need for educated workers can be handled by importing educated workers or exporting work.

The college bubble will probably go on for a while.
So the tenured professor doesn't notice the role of barriers to entry in compensation
written by Rachel, May 23, 2014 6:47

In the SF Bay Area it is not perfectly clear that education matters that much. It is hard to find a profession in which the median workers, however well-educated, make more than RNs. Aerospace engineers do not, architects do not, computer researcher scientists do not, financial analysts do not. Mathematicians do, but not by much (< 5%). And then there's the issue of job security. Hard to match the security of nurses.

The problem is that nurses' salaries are artificially elevated, not only by general problems in health care funding, but also by large numbers, strong unions, and the oligopolistic nature of hospitals in this area. It's hard for contract workers in computing and engineering to compete with that.

Of course there are some professions that do better than nurses in both security and/or compensation. Lawyers and doctors make considereably more than nurses, mathematicians and everyone else, often with real job security (or enough income to make up for it).
written by watermelonpunch, May 23, 2014 7:50
The much smaller segment of the workforce with advanced degrees have done considerably better, but this puts the cutoff between winners and losers at advanced degrees and everyone else, not between college grads at everyone else.

Isn't it something to do with that mostly only people with some kind of leg up of wealth &/or connections are going to get those advanced degrees anymore in the first place?
Not surprising
written by s ken brown, May 24, 2014 8:57
that you find Autor's conclusions not supported by the data. This is incredibly complex. I find in my 40 year career things like for instance, with a BS I am not qualified to hold my job. Candidates today must have a masters. Certificate programs are expensive and qualify one for nothing more than an entry level that any bright HS grad could walk in and land. And what did we expect competition would get us? The richest got that way by out competing the rest. Just read the latest where Trial Lawyers scotched months of work in the congress because the new patent laws would hurt their billable hours.
written by Bruce Webb, May 24, 2014 9:02
Well I think the problem is more that MBAs are counted as 'advanced degrees' even though the time required and I would argue certainly the effort is nothing like what it takes it get an advanced degree like a PhD (or even a JD).

If you are reasonably good at math to the degree that you can pass a "Calculus and its Applications" class plus "Statistics for Financial Professionals" you too can walk away with an MBA from whatever institution your connections get you into. That is it doesn't require even a semblance of 'original research' (because 'case studies' are not that), instead it is credentialing pure and simple. And it totally skews the numbers. Because trust me few History and English PhD's no matter how many languages they have mastered and how fine their analytical statistical and textual skills after six to eight years or more of Grad School are making anything like the money some fresh minted Wharton MBA is making after using his Main Line connections to secure a job.

These days a BA in Finance won't get you into the door. Not because that senior is that much less skilled than the guy who goes on to spend one or two years getting that MBA.

An interesting study would be to examine the salary scales of folks with advanced degrees requiring four years or more (almost all PhDs in whatever field) as against those fields where it requires three years or less (MBAs and JDs). And unless you believe that your average MBA is way smarter than your typical Econ PhD I suspect the results will not break down along the lines of "advanced" but rather along the lines of "credentialed" where certain credentials are more equal than others.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.