Income and Wages

Education Increasing Equality -- For The Educated

The wage gap between workers with college degrees and those with only a high school education or less has widened significantly in recent decades. Some experts say the increasing premium paid to educated and skilled workers may reduce wage inequality by gender and race.

  • From 1979 to 1995, the average difference between earnings of college and high school graduates expanded from about 33 percent to 50 percent.

  • The rising premium put on education has encouraged workers to expand their skills and training -- with fewer dropping out of high school and more extending their education.

  • Thus the share of college graduates in the workforce climbed from 18 percent in 1979 to 25 percent in 1995 -- while the proportion of total hours worked by high school dropouts fell from 21 percent to 11 percent.

New jobs are more demanding, involve more teamwork and worker participation, and are in occupations that allow people to think and be creative on the job.

  • Jobs in professional, technical and managerial occupations, for example, rose from 1 in 6 workers in 1950 to about 1 in 3 in 1995.

  • Over the 1989­1995 business cycle, 75 percent of the 7 million new jobs were in professional specialties or managerial occupations.

The increasing demand for both general and occupation-specific skills as well as education could lessen wage differentials by gender and race:

  • The wage differential between men and women fell from 37 percent in 1984 to 24 percent in 1995 -- although it is still about 32 percent among high school dropouts.

  • At the same time, the wage gap between white and black males narrowed from 26.7 percent to 18 percent. For white and black females, it fell from 8.7 percent to 6 percent.

As merit becomes more important to employers, say economists, the effects of other worker characteristics become less important.

Source: Robert I. Lerman, "Meritocracy without Rising Inequality?" Brief No. 2, Economic Restructuring and the Job Market, September 1997, Urban Institute, 2100 M Street NW, Washington, D.C. 20037, (202) 857-8709.

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