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MinnEcon Blog

The educational “haves” and “have nots”

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The American economy is starting to mend from the Great Recession, the nastiest downturn since the 1930s. The return to growth and better economic numbers is welcome, although a number of nerve wracking problems lurk in the global economy, especially Europe's sovereign debt crisis and China's slowdown.

Yet assuming that the expansion remains intact, it will still take a long time for the worst labor market in 60 years to show signs of vigor. The unemployment rate is steep at 9.7 percent and the unemployment-and-underemployment rate is even higher at 16.6 percent.

That's bad news for the job and income prospects of most workers, from blue collar employees looking to earn a paycheck at a retail store and on a factory floor to white collar managers seeking a spot in a cubicle and an office.

These are catastrophic numbers for workers with less education and less skill. Recessions often accelerate an underlying economic transformation that has been gaining momentum for years. Well, it has been apparent for the three decades that the earnings gap between those workers with a college degree and more and those with a high school degree only and less has been widening. Take this chart created by David Leonhardt of the New York Times in a recent article on the value of a college education.

The unemployment disparity between the educated haves and have nots is striking. Below are two charts of unemployment rates between 2000 and May, 2010. They look very similar at a quick glance. But the perecentage differences are striking.

Here is the unemployment rate of of those 25 and older with less than a high school diploma since 2000. Over the past decade the unemployment rate for this group never got below 6 percent. It has been 15 percent or more since May 2009.

Contrast that experience withthe unemployment rate of workers 25 and older with a BA or more.

The unemployment rate of this group over the past decade hasn't breached 5%. Little wonder more and more people worry that America is evolving into a two-tier society.