Friday, March 23, 2012

Income Gap Explained By Education?

The chart is fairly compelling:
Today, we will look at the link between education and income. Recent census data comparing the educational attainment of householders and income shows about as clearly as you can that America's income gap is really an education gap and not the result of tax cuts for the rich.

The chart below shows that as people's income rise, so too does the likelihood that they have a college degree or higher. By contrast, those with the lowest incomes are most likely to have a high school education or less. Just 8% of those at the lowest income level have a college degree while 78% of those earning $250,000 or more have a college degree or advanced degree. At the other end of the income scale, 69% of low-income people have a high school degree or less, while just 9% of those earning over $250,000 have just a high school degree.


mazenko said...

OK, there's the obvious difference between me and the guy selling iPods at Best Buy. But I have a master's degree and 75 hours past it with twenty years of experience. And, with that, I am topping out at $70K. So, a huge difference between people like me, and someone who has comparable education and experience but is pulling in $300K to $1million because he works in finance.

mazenko said...

BTW, I am in no way complaining about my salary or declaring that the hedge fund guy should give me some of his money. But I am pointing out a greater complexity to the income gap than just education. And, of course, when I am making this money, the CEO of United Health Care pulled in $100 million in 2010. Now, I do have a problem with that in terms of income disparity.

Left Coast Ref said...

None of your comments change the fact that the educated clearly make more than the uneducated. Is your comment Sour grapes, or are you just disappointed in the Public vs. Private sector? You are also forgetting that Teachers get a 2 month vacation every summer, 2 weeks at Christmas, 1 week at Easter, anywhere from 3 to 5 days at Thanksgiving and a bunch of others.
How much is all that vacation worth in pay? That's 60-68 days of "work" a year less that teachers do (assuming the working stiff gets 2 weeks off a year plus the standard Federal Holidays). I'd venture to say that teacher holidays would add up to nearly $20,000 in industry. I wouldn't trade my vacations for $30,000 though. I love teaching, and I love the time off to be with my family.

mazenko said...

LCR - you're seeing my comments negatively and sour grapes ... and that tone is simply not there.

MikeAT said...


Believe it or not I will somewhat come to your defense.

I agree you don’t seem to be putting out sour grapes on your salary in and of itself. You have entered your chosen career knowing the requirements, benefits, limits on salary, etc and I think you have enjoyed your career.

I make more than you (I won’t go into specifics there) with only a bachelor’s but I do work a lot of overtime. Plus my schedule is not as “9 to 5” as yours (as I type this I’m recovering from a 14 hour shift that ended at 400am). But I also knew the “requirements, benefits, limits on salary, etc” of my chosen profession and I love being a cop.

I will point again education and intelligence are not the same and if education were the end all then the college faculty boards would be filled with billionaires. Here are some college drop outs and not quite top of the class members who did good.

Steve Jobs. He said he could not see wasting his
parent’s life savings on a college education he would never use. The man transformed multiple industries and at the time of his death was a multi-billionaire. (OTS if you haven’t read it yet read the recent Jobs bio...great book)

Rush Limbaugh. He has one semester of college and failed ballroom dancing. He brought AM radio talk back to life in the late 80s and he’s currently worth hundreds of millions of dollars.

Sam Walton. A bachelor’s degree and he was the richest man in the country his passing. Revolutionized retail sales, especially inventory processes that have been adapted by the entire industry.

Fred Smith. During his MBA program at Harvard Business School he was given a not so good grade (a C + as I recall) by a PhD for his idea of an overnight delivery service. Mr Smith is the CEO of Federal Express.

Now you didn’t think I would not point out something you got wrong! ;<)

And, of course, when I am making this money, the CEO of United Health Care pulled in $100 million
in 2010. Now, I do have a problem with that in terms of income disparity.

It doesn’t matter that the man makes 100 million or 10 million or 10 bucks. It’s up to the shareholders of that company to pay him what they think he’s worth. If he can’t hack it they need to get rid of him and get a man who can. If you don’t like the fact you make 75K a year and he makes 100M, get off your ass and do something that makes you more money. Invent a better widget and bring it to market. Get into a career field that can lead you to serious bucks. Now you will give up a lot for it. Jobs like his ain’t 9-5 and there is no civil service protection.

There is no such thing as income disparity in a free society because you are free to make what your abilities and desire bring. If you don’t like that, tough.

Left Coast Ref said...

The response I left was before your second follow-up comment was posted. Reading it cold, it certainly sounded negative and sour. Your 1:08pm post clears that up somewhat, but your comment about "income disparity" makes me wonder, who gets to decide how much is enough and too much for people to make? Do I wish I made more? Of course, but I know that I have been blessed beyond measure, and the $75,000 I make teaching is more than enough to allow my wife to stay home with my kids. I'm okay with my Science major not getting paid equal to "industry" due to the factors I gave in my original post.

On another level, I think Professional Golf has it right: you play well, you get paid well. You suck, you don't get paid. Find some sponsors to pay you to wear their swag and make sure you get food on the table.

mazenko said...

Mike, I'm touched.

Anonymous said...

The chart is compelling, but not necessarily causal. I expect that one could make a similar chart with IQ versus income (and probably other, less easily measured characteristics ... like reliability).

What I *don't* like about the chart is that it implies that the "fix" is to just get more people through college.

The problem with that is that somehow getting most of the IQ 85 people through college isn't the same thing as having them learn what the IQ 115 folks are learning in college.

In short: The obvious "fix" almost certainly isn't.

What I would find much more useful would be a rigorous explanation for why the less well educated (and probably less intelligent) did so much better in relative terms in the 1950s and 1960s. I have an opinion, but that is all that it is.

If we can't go back, that would be useful, even if the plan is to demagogue the issue.

I'll also observe that the chart uses "total money income" for the X-axis. Taxing this income probably won't change those values, so the chart would be pretty similar even with very high tax rates (similar because you could shift the blue line out a bit to the right via transfer payments, but the red line wouldn't move). This is kinda addressed in the last paragraph and the answer to his question could be: Change the X-axis to be post-tax-and-transfer income. Then taxing the hell out of the "rich" would lower the slope of the red line ... which would help close the income gap (a 100% marginal tax rate on everyone making more than $100K per year would be equally effective, of course ...).

-Mark Roulo