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.