Wednesday, March 7, 2007

Is the value of higher education diminishing?

A new study released by the Chicago Federal Reserve Bank attempts to find out why the economic value of an additional year of education flat lined over the past ten years. The explanation given is a robust increase in wages paid to low-income workers during the roaring 90s. The author speculates that this trend will continue if the recently proposed minimum wage increase becomes law.

Despite the
flat line, having a college degree still nets you double the annual average income of a high school graduate.

Could this signal a softening of the divide between the rich and poor? Perhaps, but the author notes that low-wage earners could have been particularly burdened by a loss of health benefits compared to their high-wage counterparts over the past ten years. Accounting for benefits, this "
flat line" effect might disappear entirely.

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