What explains the rising economic inequality?
Although there are a variety of ways to explain trends in wage inequality, perhaps no cut at the data has been more revealing than the differences in real wages by education. As Figure 2 shows, since the early 1980s, the wage gap between college graduates and those with a high school education or less has widened dramatically; the gap between high school graduates and non-graduates also has widened, but less so. Thus it appears that the demand for college educated workers has outstripped the supply. While rising returns to education at the upper end of the distribution led to a pickup in college enrollment, the increase in supply has not been sufficient to reduce the wage gap between college and high school educated workers. It’s important to recognize, however, that shifts in the return to education and the educational attainment of the workforce cannot fully explain the evolution of inequality over the last 30 years because, even within groups with the same level of education, the ga
