Posts Tagged ‘education’

 

My article, “Contending Economic Theories: Which Side Are You On?” has just been published on Taylor & Francis Online for the journal Rethinking Marxism.

The first 50 interested readers (actually 49, since I downloaded a copy for myself) can download the text of the article here.

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We hear it all the time: higher education is the best solution for economic inequality.

Well, as it turns out, not so much—at least according to a relatively simple and straightforward simulation exercise conducted by 

Imagine a situation in which ten percent of non-college educated men aged 25 to 64 were to immediately obtain a bachelor’s or advanced degree. (As the authors explain, “this would be a tremendous accomplishment. It is only slightly less than the observed increase in the college share over the entire 34-year period of 1979 to 2013.”)

Here’s what they found:

1. Increasing the educational attainment of men without a college degree will in fact increase their average earnings and their likelihood of being employed (but it still wouldn’t make up for what they’ve lost, at the 50th percentile and below, since 1979).

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2. Increasing educational attainment will not significantly change overall earnings inequality (as measured by the Gini and Theil indices). (The reason is that a large share of earnings inequality is at the top of the earnings distribution, and changing college shares will not shrink those differences.)

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3. Increasing educational attainment will, however, reduce inequality in the bottom half of the earnings distribution, largely by pulling up the earnings of those near the 25th percentile (but that still doesn’t improve overall inequality)

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Hershbein, Kearney, and Summers are in favor of increasing the level (and, I would add, the quality) of education of workers at the bottom of the distribution of income. Who wouldn’t be?

But, they warn,

additional and separate measures will be needed to address rising levels of overall inequality, which, as we have shown, is mostly driven by changes at the top of the distribution.

The lesson: we’re not going to solve the problem of growing inequality unless and until we go beyond the suggestion of more education and begin to imagine and create radically different—more democratic and equal—economic institutions.

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Student-debt

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Apparently, there’s a new documentary film [ht: ja]—Boom Bust Boom, directed by Monty Python’s Terry Jones—whose aim is to to popularize the work of Hyman Minsky.

Minsky’s genius was to show that financially complex capitalism is inherently unstable. Under conditions of stability, firms, banks and households will, over time, move from a position where their income pays off their debt, to one where it can only meet the interest payments on it. Finally, as instability rises, and central banks respond by expanding the supply of money, people end up borrowing just to pay back interest. The price of shares, homes and commodities rockets. Bust becomes inevitable.

This logical and coherent prediction was laughed at until it came true. Mainstream economics had convinced itself that capitalism tends towards equilibrium; and that any shocks must be external.

This is the latest attempt, in a long sequence since the crisis of 2007-08, to rediscover and examine the implications of Minsky’s work (which I’ve discussed many times on this blog).

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According to a new study by the Federal Reserve Bank of St. Louis, little has changed over the past 25 years in terms of the glaring wealth gap in the United States between blacks and Hispanics on one hand, and whites on the other.

The median wealth levels of Hispanic and black families are about 90 percent lower today than the median wealth levels for whites. Back in 1989, the median wealth of a white family was $130,102. In 2013, it was $134,008, after adjusting for inflation. For a Hispanic family, they were $9,229 and $13,900, while for a black family, they were $7,736 and $11,184.

The one group that has experienced an improvement, both absolutely and relative to whites, are Asian families. Their real median wealth grew between 1989 and 2013 from $64,165 to $91,440. And, because of that growth, and the precipitous decline in white family wealth after 2007, Asian household wealth rose from 49 to 68 percent of white wealth.

While the authors of the study do not attempt to analyze all the factors causing the large and persistent gap between white and black/Hispanic wealth, they do look at the role of age profiles and educational attainment and conclude that

differences in the age composition and in the level of educational attainment across groups explain relatively little of the gaps. Indeed, race- and ethnicity-related financial-health disparities are greatest among older and better-educated groups, where financial health and wealth generally are at their highest levels.

Feed the Birds

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