Technology, education and income

The stock market hit another all time high this past week. President Trump’s claims this is a sign of his success. The statement reminds me of statements made about history – individuals experience history quite differently and the winners get to write the account of history. I stop short of accepting that Trump is a winner, but he is wealthy and the wealthy are certainly benefiting from present circumstances.

The impetus for this post was an article from the MIT Technology Review. Obviously, in addition to economics and politics, the article must have something to do with the role of technology and we all are influenced. This article is “heavy” and a challenging read, but it brings together the positions from several books I have been trying to understand (Thomas Piketty’s Capital in the Twenty-First Century and Erik Brynjolfsson and  Andrew McAfees’ –  The Second Machine Age). Both works present explanations for the widening income disparity in the U.S. and many other countries.

For example, consider the following statistics:

And the inequality has only gotten worse since the last recession ended: the top 1 percent captured 95 percent of income growth from 2009 to 2012, if capital gains are included.

This is the problem in using the present stock market as an indicator of success. Poor folks have very limited stock portfolios.

The article points to a barbell shaped labor market with declining opportunities for the middle class. There are plenty of opportunities for low paying jobs so there is little incentive to raise the salaries associated with these jobs. This particular barbell is quite misshapen and not symmetrical. Contrary to some who are beginning to doubt the value of a typical college education, there are still significant advantages for the well educated.

The gap between median earnings for people with a high school diploma and those with a college degree was $17,411 for men and $12,887 for women in 1979; by 2012 it had risen to $34,969 and $23,280.

Both books cited in this article question the view that the U.S. economy is driven by merit. Piketty blames the increasing disparity on held capital (often from inherited wealth) and Brynjolfsson insight and luck in taking advantage of technology (robotics, computer-supported efficiencies). Education alone will not sufficiently address the increasing disparity placing more and more resources at the disposal of the super rich – those capable of using their resources to increase and sustain their advantages through using wealth to manipulate political processes.

The article concludes that while not a total fix, finding ways to provide access to “high quality” education seems at least part of the solution. Presently, family income is one of the best predictors of access to the best institutions.

K-12 institutions also contribute to the increasing disparities:

Local governments, using property taxes, supply an average of 44 percent of the funding for elementary and secondary schools in the United States, helping to fuel the disparity in educational investments between poor and rich communities.

Despite the calls for local control, local input is also a major limitation.

I am not sure I or the authors make the case that education will be the solution to the increasing problem of inequities. I do not see this in the data and interpretations the economists provide. I do believe education is part of a solution, but educators cannot be oblivious to the larger context that probably only has a political solution. As part of the solution, I think it imperative that educators make it clear that they alone cannot address this problem.

As always, I encourage my readers to review the sources I identify. I am functioning at the limits of my background when it comes to issues of economics and political processes, but I believe it important to make the effort to understand.

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