Part one in a three-part series

by Carol Frenier

Most people would readily agree that income and education are correlated. We can see that easily enough in the experience of individuals. But how it works in a society as a whole is less understood, especially when we try to understand what causes an increase or decrease in the income gap, that is, the gap between the salaries of the highest paid earners and the lowest.

In 2008 Harvard professors Claudia Goldin and Lawrence Katz set out to understand the relationship between the demand for skilled workers in our economy and our educational system¹. They used the income gap as a measure of whether our education system was working well or not. Here is why:

Imagine a country in which there are only 50 qualified people to fill every 100 high-skilled jobs. Employers strive to hire as many qualified people as they can. To compete with other companies, they have to offer employees something more—a higher salary, perhaps, or extra benefits. People at the high end of the qualification spectrum can pretty much name their price. On the other end of that spectrum, imagine there are 150 low-skilled workers available for every 100 low-skilled jobs. Employers can be picky about whom they hire, and they can bargain down the wages. The result: the income gap is wide. Top earners make multiple times what low earners make.

Now supposing this country redesigned its education system to train more people to qualify for the high-skilled jobs. Let’s assume this changes the balance so there are now 95 qualified people for every 100 high-skilled jobs and only 105 low-skilled people left for every 100 low-skilled jobs. Employers would still pay the higher-skilled people more because they provide more value to the company, but they would not have to pay premiums to get these workers. Similarly, employers couldn’t be as picky in hiring low-skilled workers, nor could they bargain down the wages so low. The result: the income gap is narrow. The gap between top earners and low earners is narrow enough for the bulk of the population to feel that the system is fair.

Thus a wide income gap is, at least in part, the result of the failure of a society’s education system to keep pace with economic and social needs of that society. Narrowing the gap is less achieved by sameness in education than it is by effectiveness. The knowledge and skills students are taught in school must match what they will need in order to participate in our economy and civic life. As eminent economist Thomas Sowell² points out, if you cannot get beyond elementary school math, you are literally frozen out of the vast majority of employment opportunities in this country.

Goldin and Katz documented the relationship between the demand for skilled workers in our economy, the supply of qualified young people produced by our educational system, and the size of the income gap. Effective mass education in the United States, they say, far outpaced the rest of the world until the 1980s. From 1915 to 1980 education kept pace and even got ahead of technology, thus reducing skill premiums and narrowing the income gap.

There is a growing concern today among American parents about the lack of effectiveness in our education system. Their concerns are not misplaced. According to NAEP’s 2022 scores only 31% of U.S. 8^th graders are proficient in reading, 26% in math, 13% in U.S. History, and 20% in civics. Vermont doesn’t fair much better. The 2022 Smarter Balance scores show Vermont’s 8^th graders at 43% proficiency in English and 29% in math, not even half of the student population.

What happened in 1980 and beyond that resulted in the decline in our educational effectiveness and our relative status in education worldwide? 

This is a difficult and complex economic and policy question that challenges our society. But according to Goldin and Katz, Americans have met these kinds of challenges before. “We should not lose track of our history, “they say. “We must shed our collective amnesia. America was once the world’s education leader. The rest of the world imported its institutions, and its egalitarian ideals spread widely. This alone is a great achievement and one that calls for an encore.”

An encore indeed! But what were the qualities of the first act that we have lost sight of? Our educational history is what we will examine next.

1. Goldin, Claudia and Lawrence F. Katz, The Race Between  Education and Technology, Harvard University Press, Cambridge, MA, 2008.
2. Sowell, Thomas. Charter Schools and Their Enemies, Basic Books, New York, NY, 2020.

A Chelsea VT resident since 1992, Carol Frenier taught high school U.S. History for a decade before joining her husband, Bob, in a marketing business. Now retired, she most recently subcontracted as an indexer with Norwich University for many years.