Some commentators are under the false impression that wage inequality is a simple consequence of employers’ demand for increased skills and education—often thought to be driven by advances in technology. According to this myth, because there is a shortage of skilled or college-educated workers, the wage gap between workers with and without a college degree is widening. This is sometimes referred to as a “skill-biased technological change” explanation of wage inequality (since it is based on the notion that advances in technology lead to the need for more skills). But new data from 2014 shows that even college educated workers and workers with advanced degrees are not in demand enough to see their wages rise.
The figure below shows the most recent data on average hourly wages by education. Here we find reinforcing evidence that there is no sign of a technologically related demand for more-credentialed workers. The workers with the credential that should be in high demand—four-year college graduates—have not done that well, especially in the last year. In fact, among education categories, the greatest real wage losses between 2013 and 2014 were among those with a college or advanced degree. Workers with a four-year college degree saw their hourly wages fall 1.3 percent from 2013 to 2014, while those with an advanced degree saw an hourly wage decline of 2.2 percent. If demand for high-skilled workers were driving wage inequality, we would expect to see these workers’ wages increasing, or at the very least, falling less than their low-skilled counterparts.
Even the most educated workers have declining wages: Cumulative percent change in real average hourly wages, by education, 2007–2014
|Year||Less than high school||High school||Some college||College||Advanced degree|
Note: Sample based on all workers age 18–64.
Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata