The college wage premium affects inequality very little

David Leonhardt of The New York Times recently reported on the evolution of the college wage premium, or the difference between average earnings among those with a college (but no graduate) degree and those who do not attend college. The premium has increased substantially, while the premium for those who attend “some college” without actually earning a degree has not changed at all. From this data, Leonhardt concludes that people ought to graduate from college despite the enormous cost of college tuition.

On the face of it, this conclusion makes sense. Leonhardt writes:

 The decision not to attend college for fear that it’s a bad deal is among the most economically irrational  decisions anybody could make in 2014. The much-discussed cost of college doesn’t change this fact. According to a paper by [Professor David] Autor published Thursday in the journal Science, the true cost of a college degree is about negative $500,000. That’s right: Over the long run, college is cheaper than free. Not going to college will cost you about half a million dollars.

But the implicit conclusion that many people are unwisely choosing not to finish college flies in the face of a number of other factors that I discuss in my recent column. These factors are particularly relevant for policymakers, who would be mistaken to think that a four-year college degree is the most effective way to reduce income inequality. And that’s why Leonhardt’s conclusion—“as the economy becomes more technologically complex, the amount of education that people need will rise [and] at some point, 15 years or 17 years of education will make more sense as a universal goal”—doesn’t quite fit all the facts about inequality.