Skills, education, and the rise of earnings inequality among the “other 99 percent”

Income Distribution, May 2014

The sin­gu­lar focus of pub­lic debate on the “top 1 per­cent” of house­holds over­looks the com­po­nent of earn­ings inequal­ity that is arguably most con­se­quen­tial for the “other 99 per­cent” of cit­i­zens: the dra­matic growth in the wage pre­mium asso­ci­ated with higher edu­ca­tion and cog­ni­tive abil­ity. This Review by SEII’s David Autor doc­u­ments the cen­tral role of both the sup­ply and demand for skills in shap­ing inequal­ity, dis­cusses why skill demands have per­sis­tently risen in indus­tri­al­ized coun­tries, and con­sid­ers the eco­nomic value of inequal­ity along­side its poten­tial social costs. I con­clude by high­light­ing the con­struc­tive role for pub­lic pol­icy in fos­ter­ing skills for­ma­tion and pre­serv­ing eco­nomic mobility.