Income and Wages

Benefits Of A Wage Gap

In all the hand-wringing over the income gap between rich and poor, scant attention is paid to the fact that the disparity of income is often due to the decisions of individuals and their adaptability to change.

"What's happening," according to Sen. Connie Mack (R-FL), chairman of the Joint Economic Committee, "is that the country, in essence, is rewarding knowledge and education and the ability to communicate, and those fundamentals are being demanded more and more each day."

Americans seem to be responding to market rewards by boosting the supply of potential employees with a college education.

  • The share of 18-to 24-year-olds enrolled in college grew from 26 percent to 35 percent between 1980 and 1994, according to the 1996 Economic Report of the President.

  • Even though the population of college-age youth dropped by 15 percent between 1980 and 1993, the numbers of associate, bachelor's and doctoral degrees awarded grew by 28, 25 and 29 percent respectively.

One recent study by economists John E. Dinardo and Jorn-Steffan Pischke of labor data from Germany compared wages on the basis of workplace tools used.

  • Workers who used a calculator on their job earned 9 percent to 13 percent more than those who did not.

  • Those who used a telephone each day earned 12 percent to 14 percent more.

  • Just being in a job that involved sitting rather than standing for much of the day yielded 10 percent better pay.

The message is that being educated, literate, numerate and highly skilled will help people close the "income gap."

Source: Perspective, "In Praise of the Wage Gap," Investor's Business Daily, August 2, 1996.

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