Chart(s): Why is the Educational Level Wage Gap Widening?
Here we get a three-for-one thanks to an enlightening article by Rob Valletta titled “Higher Education, Wages, and Polarization” published in the January 12, 2015 edition of the FRBSF Economic Letter. This particular article and its chart series seeks not only to capture the “what” of the increasing wage gaps between high school, college, and graduate diploma/degree holders but the “why.” If the conclusions of the article are correct, then we get a substantial clue as to the potential earnings power of any given student as well as some applicability for those considering their options.
In the first data set presented by Mr. Valletta we note that indeed, the wage differences between high school, college only, college plus, and graduate degree educational levels are not only divergent, but increasingly so:
Why? What do graduate degree earners bring to the table that justify an ever-larger slice of the earnings pie? To answer this question, we can take note of another phenomenon. American workers increasingly face job losses due to mechanization or outsourcing. Only those jobs, whether cognitive or manual in nature, that require “non-routine” task completion have experienced employment growth in the past seven years. (Non-routine jobs don’t “follow relatively set rules and consist largely of repeated actions” but rather “require flexibility and often social skills”):
Mr. Valletta believes this phenomenon does indeed explain the widening wage gap between the educational levels, particularly in regard to the differences between bachelors and graduate degree earners, because those with graduate educations increasingly account for participation in the non-routine cognitive job space:
If true, this phenomenon not only explains why graduate degree earners increasingly make more compared to lesser-educated peers it also gives us great insight into the potential value of an education at any level, whether one obtains an associates, bachelors, or certificate.
In order to be relevant, and relevantly paid, in today’s marketplace workers must master skills that can’t be broken down into simple steps and performed by machines, minimum wage workers, or offshore labor. Think of how many once good jobs of the past have been negatively affected or outright eliminated by technological changes: telephone operators, typists, meter readers, website builders, draftsmen, basic tax accountants, travel agents, seamstresses, warehouse workers, typesetters, mail deliverers, stock brokers, librarians, farmers, craftsmen of all stripes, and many, many more. This wave of creative destruction continues unabated. Think, for instance, about how many professional drivers of taxis and semi rigs will be affected if Google succeeds in making computer-driven vehicles a reality.
Only those jobs that require on-site human presence, wisdom, or human-to-human interaction will remain. It perhaps goes without saying that one’s educational return on investment, whatever the degree, will largely have to do with how well trained one was to think on one’s feet, to create, and to work with people face-to-face. It no longer suffices in the world of instant search engine results to go to school to accumulate knowledge. Indeed, an education will only count if the student knows how to apply that knowledge in an economy that primarily awards the clever over the smart.