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Widening The Gap

Higher education and income inequality

By Eric J. Hollenberg

The issue of wealth inequality in the United States is now, more than ever, dominating public conversation across all sectors.  Many academic economists have been at the forefront of the of the argument (such as Stiglitz and Mankiw, among countless others), though taking there word as absolute truth on the subject would be naive. No one discipline has an academic monopoly on the subject, as it is relevant in economic, political, sociological, psychological and philosophical realms.  What effects does concentrated wealth have on democratic government?  Is the current economic system fair?  What is a fair economic system?  The list of issues and questions goes on and on, criss-crossing multiple subjects as it goes.

There have been many proposed policy prescriptions to fix the current issue, which is reaching levels that have never been seen before.  From admittedly Utopian global wealth taxes to better financial educations, the ideas and possibilities are endless.  Despite the breadth of conversation that is ongoing, I find that most arguments or opinions on the matter neglect the other factors contributing to wealth inequality.  Most importantly, much of the origins and aspects of said inequalities involve a much wider scope of academic disciplines.

Standard economic canon teaches us that a worker’s compensation is perfectly equal to their marginal productivity.  Essentially, perfect markets ensure that people are paid what they deserve.  Theoretically, this means that no matter what your background is, you will be paid what you deserve.  Work harder and more efficiently, and you will be paid more.  Clearly, this theory is very limited in its scope and is unable to explain or justify current trends of extreme divergence in wealth.

Perhaps more than any other institution in our society, higher education epitomizes our most revered values across these broad disciplines in regards to inequality.  Indeed, most Americans view a college degree as a ticket for the American Dream, and most statistics seem to confirm that notion.  From earnings to overall life satisfaction, a college education is a life changing experience.  College doesn't just have private benefits; it is a powerful tool to create a civically engaged, healthy and financially independent society   The American government realized the benefits of college long ago, to the point where the creation of a public university was a requirement to join the country as a state.  When passing his sweeping reforms, President Lyndon B. Johnson remarked that education was the antidote to the "tyranny of ignorance" that was holding down those in poverty.

Despite its noble mission, and clear benefits, college in America is failing its most basic test: accessibility.  Public funding for universities is declining at an alarming rate (as shown in tuition rises at places like Penn State), making it harder for students to afford school.  This creates an immense loan handicap for lower class kids that make it harder for them to truly break free and rise in society.  While overall college enrollment rates are up, this can mostly be explained by more kids from the upper class enrolling rather than an equal rise from all classes, and the difference is quite severe.  The top quintile of society has increased their presence in college by double the amount the bottom quintile has.  Even if kids from the bottom quintile get to college, they are six times less likely to actually complete school and get a degree when compared with their upper class peers.  Current economic conditions have hampered college's ability to help the needy through school.  Reed College in Oregon recently made the decision to decline admission to over 100 qualified students, because they simply could not afford to keep them and did not want to pursue other avenues of letting them in.  Colleges have increasingly been awarding merit scholarships to those who do not need financial aid (the top quintile), leaving those in need behind.  This can be explained by early life disparities, as kids from low income families are much less likely to have good scores, and colleges are failing to adjust to this trend, making the higher education gap only accelerate.

Clearly, a college education leads to immense financial benefits, and can be a catalyst to stop forces of class divergence.  Unfortunately, the ones receiving these benefits appear to be the ones that do not need it the most.  The upper class is dominating the college degree game, and all indicators such as early life success and state budget cuts imply that this divergence will only continue to intensify. Though the economy is recovering from the depths of 2008, the lower classes have not recovered. Despite being a beacon of hope to many Americans, higher education is only adding fuel to the fire.

Eric J. Hollenberg ’17 lives in Adams House. His column will appear every two weeks this summer.

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