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Great Gatsby Goes to College

Shwetlena Sabarwal's picture

Nick Carraway, the narrator in F. Scott Fitzgerald’s The Great Gatsby, remembers his father saying, “Whenever you feel like criticizing anyone … just remember that all the people in this world haven't had the advantages that you've had.”

What advantages? For starters, wealth, power, and in today’s developed world - college.

In the U.S., the college wage premium has risen rapidly since 1980 – causing a widening earnings gap between the college and non-college educated. Those with a bachelor’s degree earn over $800,000 more in lifetime income, on average, than those with high school diplomas. In the OECD, the college wage premium averages at 28 percent for male, full-time working employees - ranging from 18 per cent in Sweden to 50 per cent in the Slovak Republic. 

As higher education expanded, college wage premiums were expected to decline. So why are they high and, often, increasing?

The consensus seems to point to increased computerization and automation in labor markets. Technology is expanding the demand for the college educated, at the expense of the non-college educated. This ‘job polarization’ in the labor market, manifests as the growth of high-education/high-wage jobs at the expense of middle-education/middle-wage jobs. This is increasingly visible not just in advanced economies, but also in the developing world. According to the Word Development Report 2016 on Digital Dividends, the share of middle-skilled employment is down in most developing countries for which detailed data are available.

What makes this truly Gatsbian is that the college divide is no longer just an economic divide – it’s a social gulf.

Recent commentary has blamed the college divide for reshaping the ‘class’ divide in the U.S. College-graduates are the ‘elite’ - insulated and out-of-touch. The college and non-college educated live in different worlds. Not only do college graduates live longer, they also earn more money, stay married longer, are happier, and live longer. They also think and feel differently. College attendance appears to change civic participation and political attitudes. The new political divide is the college-divide – and growing discontent from the non-college educated is reshaping the developed world.

This resentment has echoes of the Great Gatsby. College education is the ticket – but the system is rigged.

College education is not – and has never been - available to all.  However, the extent to which education systems are complicit in perpetuating broader inequities is increasingly in focus. In the U.S., for instance, gaps in college attainment by family income have actually increased over time.  This is true even after controlling for academic achievement. Among high school students scoring in the top quartile on a standardized test, only 41 percent of those from the poorest families earn a bachelor’s degree, compared to 74 percent of students from high-income families. High-achieving low-income students in the U.S. often do not even apply to selective schools for which they are qualified.

Modern societies look to education as the great equalizer – and when education fails to deliver, there are consequences. It’s no accident that Alan Krueger called the relationship between high-income inequality and low generational mobility the The Gatsby curve. Just like the novel, it reads pretty tragic.

This post is part of a blog series titled #HumanEcon by Shwetlena Sabarwal. Future posts can be found here.

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