My Home About Me

It would be so simple to solve the problem -- the purported problem, I should say -- of income inequality: just make sure that no one graduates from high school. Gary Becker and Kevin Murphy write:

Politicians and many others in the United States have recently grown concerned that earnings inequality has increased among Americans. But as the example of China?or India, for that matter?illustrates, the rise in inequality does not occur in a vacuum. In the case of China and India, the rise in inequality came along with an acceleration of eco?nomic growth that raised the standard of living for both the rich and the poor. In the United States, the rise in inequality accompanied a rise in the payoff to education and other skills. We believe that the rise in returns on investments in human capital is ben?eficial and desirable, and policies designed to deal with inequality must take account of its cause.

...The potential generated by higher returns to education extends from individuals to the economy as a whole. Growth in the education level of the population has been a significant source of rising wages, productivity, and living standards over the past century. Higher returns to educa?tion will accelerate growth in living standards as existing investments have a higher return, and additional investments in education will be made in response to the higher returns. Gains from the higher returns will not be limited to GDP and other measures of economic activity; education provides a wide range of benefits not captured in GDP, and these will grow more rapidly as well due to the addi?tional investments in schooling.

Why is the earnings gap widening? Because the demand for educated and other skilled persons is growing. That is hardly surprising, given developments in computers and the Internet, advances in biotechnology, and a general shift in economic activity to more edu?cation-intensive sectors, such as finance and professional services. Also, globalization has encouraged the import?ing of products using relatively low-skilled labor from abroad. At the same time, world demand has risen for the kinds of products and services that are provided by high-skilled employees.

Thanks to my new DC insider pal "Mick Danger" for the link.

Amateur Investors   assets   bailout   bottom   capitulation   climactic   credit crunch   Currency ETFs   day trading   Deron Wagner   DJIA chart   Dow 1929 Crash   economic data   Emini's Nas 100   emini's S&P 500   emini's S&P 500e   ETFs (exchange trade funds)   ETFs (exchange traded funds)   inflation   International ETFs