College Raises Wages, Not Close Income Gap

In both California and the nation, income inequality is at or near record levels. Because 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. Unfortunately, for those who argue for policies that will lead to greater levels of educational attainment, the answer is mostly no. This does not mean we should stop pushing for higher levels of education. Indeed, on average, college graduates earn far more in the labor market than do less educated workers. It’s just that the variation in wages for college graduates is quite wide. Inequality at relatively high wages is better than the alternative of low wages for everyone, and improvements in educational attainment will lead to higher incomes on average. But don’t expect to reduce income inequality substantially simply by  increasing the rate of college graduation.