Investing in education can’t solve inequality – takes way too long and Canada proves

It has long been fashionable to assert that improved education is the answer to our growing inequality problem. But even if increasing educational attainment reduced inequality of opportunity between the disadvantaged and the middle class – and reduced wage differentials within the middle class – this does not imply an acceleration of the rate of average income growth of the bottom 99 percent.

Educational initiatives are notorious for long time lags. Even an all-powerful leader with a magic wand that could instantaneously revolutionize primary and secondary education in 2015 would have to wait 12 years to see, in 2027, the full impact of this policy on high school graduates. [pullquote] Educational initiatives are notorious for long time lags. [/pullquote] To improve education over current levels, some post-secondary education would then be needed, pushing graduation back to 2031 or later – by which time the income gaps projected in Figure 1 would already have fully emerged.

Even then, aggregate impacts would initially be small, because the flow of new graduates entering the workforce each year is only about 1/40th of the workforce, and the impact on average labor force skills is the differential between the skills of entering and retiring cohorts. It would be roughly another twenty years before new entrants were the majority of workers (i.e. around 2051, or about 36 years after the change).

Furthermore, since most people have completed their education by their mid-twenties, a focus on “solving” the inequality problem through improved education essentially means writing off older generations – i.e. anyone now over 30, which is most of the population.

Canada’s experience offers a guide to whether an expansion of education can really be expected to solve the inequality problem. For the age group 25-64, Canada’s tertiary education attainment level (51 percent in 2010) substantially exceeds that of the United States (42 percent).[1] [pullquote] In Canada, improved education has not produced greater income inequality. [/pullquote]

Canada’s investment in education has been a “good thing” for many reasons, but it has not prevented the stagnation of median household incomes in Canada and has not produced greater income equality.

Education is a good thing – just don’t expect it to solve the problem of rising income inequality anytime soon.