The U.S. may be returning to levels of inequality last seen in the Victorian era, with a stark divide between the haves and have-nots that economists say could be due to educational attainment.
Workers with advanced degrees who work more than 40 hours a week have boosted their income since 1980, according to a new study from economists at UCLA and the Pontificia Universidad Católica de Chile.
At the same time, wages for workers with only high school degrees have declined, partly due to a loss of manufacturing jobs, the economists write in a new working paper at the National Bureau of Economic Research.
In other words, the value of a secondary education has declined during the past 40 years, with the average incomes of high school grads dropping 12% during that time.
Income for advanced degree holders, meanwhile, has jumped 18%, the study noted.
One issue, the economists say, is that low-wage service jobs in hospitality, leisure and health care have popped up to fill the void left by higher-paying manufacturing jobs.
“To end this essay provocatively, we suggest we may be returning to the income inequality of the Victorian age but with talent replacing land as the source of inherited wealth and power,” the economists, Chile’s J. Rodrigo Fuentes and UCLA’s Edward E. Leamer, wrote in the paper.
The findings come as the gulf between the top 1% of income earners and everyone else is the widest it’s been in at least 50 years, according to Census data. While every society has some level of inequality, an excessive imbalance can hamper economic growth and create challenges to social mobility.
To be sure, having an advanced degree doesn’t ensure that you’ll crack the top 1% of income earners. In fact, the average income for a professional with an advanced degree was about $95,000 in 2016 — far below the roughly $515,000 in annual income required to join the ranks of America’s richest.
But it’s clear that workers with higher levels of education are faring much better than those with only high school degrees, who earned about $33,000 per year on average in 2016, the study noted.
There are no lack of proposals about how to tackle the problem of widening inequality, including competing wealth taxes on billionaires from Senators Bernie Sanders and Elizabeth Warren. Warren is proposing to add a 6% tax on wealth above $1 billion, which would raise revenue to help pay for her Medicare-for-all plan.
Billionaires, perhaps not surprisingly, aren’t all that thrilled with the idea —including those known for philanthropy, such as Bill Gates and JPMorgan Chase CEO Jamie Dimon, who recently criticized the billionaire-bashing candidates of “vilifying successful people.”
And it’s easy to see why they aren’t thrilled once some of the wealth tax numbers are run: Gates would have been worth about $14 billion in 2018 instead of $97 billion if the tax had been in effect since he enjoyed great success as a tech entrepreneur back in1982, according to an analysis from The New York Times.