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Brooks Wilson's Economics Blog: The College Premium

Monday, July 5, 2010

The College Premium

In a comment to the post, "Summer Job Market for Teens," a student correctly observed that teenagers and other low skill workers could earn college degrees to improve their income.  The "college premium" has grown over time.  Raghuram G. Rajan writes in "Fault Lines," his recent book on the causes of the financial crisis and policies to achieve a more stable economy, that
Much of the 90/10 differential [the 90th percentile wage earner's income vs. the 10th percentile wage earner's income] can be attributed to what economists call the "college premium."  The ratio of the wages of those who have only a bachelor's degree to those who only have a high school degree has risen steadily since 1980.  The 2008 Current Population Survey by the Census Bureau indicated that the median wage of a high school graduate was $27,963, while the median wage of someone with an undergraduate degree was $48,097--about 72 percent more.  Those with professional degrees (like an MD or MBA) earn even more, with a median wage of $87,775.
Rajan's book is a well written, provocative, enjoyable read, not an easy combination for economists describing the financial crisis.  He describes growing income inequality as a fault line in the American economy, and the failure of maintaining our international education lead as a major cause of growing inequality.  I recommend it.   Replace this text with...


  1. I would not consider the income inequality a fault line. That inequality is based on the individuals own accord. For those of lower income wanting to go school, to improve their income, there are plenty of ways to pay for college: work and pay your way, scholarships, loans and grants. It will just take time to earn the higher income due to going to college and then working your way up the ladder.

  2. In today's world going to college is almost a must to have a shot a decent living situation. I agree with what Vee said that if you desire to seek higher education their are many means possible to acquire the money. For most student loans can be expensive but are worth it in the long run.