Higher Education, Wages, and Polarization

Barry Ritholtz posts Rob Valletta's article about Higher Education, Wages, and Polarization.

A post-graduate degree is an increasingly important part of the skill portfolio for individuals in the high-skill non-routine cognitive occupations. This finding should not be interpreted as implying that a college degree is an inadequate credential for labor market success. As shown in Figure 1, the wage gap for people with college degrees continues to be very high, and recent research has verified that a four-year college degree remains a sound financial investment for most workers (Daly and Bengali 2014, Abel and Deitz 2014).

Nevertheless, the findings in this Economic Letter appear to highlight an important role for new technologies and labor market polarization, with implications for the U.S. wage structure. Lindley and Machin (2013) report similar findings regarding the growing gap between graduate and college-only degree holders. They also show that the proportion of workers with post-graduate degrees rose more in occupations that experienced larger increases in computer use in recent decades. This reinforces the apparent link, or complementarity, between computer-based workplace technologies and the skills of workers with graduate degrees.

On the other hand, Beaudry, Green, and Sand (2013) present evidence that the importance of technological skills in the U.S. labor market has declined since the year 2000. This also corresponds to the period of relative stagnation in the wages of college-only versus post-graduate degree holders shown in Figure 1. Their evidence suggests that the growing wage gap for post-graduate degree holders reflects their direct competitive advantage over lesser-educated individuals in regard to well-paid jobs, rather than their skills complementing the evolving technological content of jobs. This view can also explain rising “underemployment” of young college graduates, defined as their tendency to work in jobs that do not strictly require a college degree (as in Abel, Deitz, and Su 2014 and Rampell 2014). Sorting out the specifics of enhanced versus diminishing reliance on technological advances in the workplace is a critical labor market issue that may have important implications for future U.S. education policies.

Emphasis Mine

As Department II is hollowed out by the advances in automation, and by off-shoring, workers are increasing divided (or polarised) between Department I and the service industries.

This raises a serious problem about the political consciousness of the working class. There are workers being crushed in the service industry by being employed at jobs that are below their capabilities. An there is the worker aristocracy who believe that individual effort and nerit got them their current job.

It would seem very hard to convince either group that a society run by workers on thorough-going democratic principles would ever be possible.

Such a society requires a social view of society rather than a competitive hive of individuals.

ginning of my post.

And here is the rest of it.