The Nov/Dec 2014 issue of the MIT alumni magazine, Technology Review, had a long cover story on inequality, "Technology and Inequality", by editor David Rotman. While it isn't particularly surprisingly that MIT thinks more spending on education is the solution to all problems I nonetheless found it irritating in this instance. Misdiagnosing a real problem is harmful not just because it encourages spending on solutions that will not work but also because it discourages investigating solutions that might work.
The problem with the MIT article (and many similar ones) is that it correctly notes that people who have completed more levels of education tend to earn more money in their subsequent careers and then jumps to the almost certainly false conclusion that the additional years of schooling are why they are more valuable employees. It seems far more likely that some people have more natural academic ability than others and that the traits that make them good students also make them good employees. So the educational system is just identifying students who will make especially good employees. For the most part students who do poorly in school do so because they lack natural academic ability not because their schools are especially bad. There is confusion on this point because average academic ability varies widely between schools so some schools have lots of high ability students who do well and other schools have lots of low ability students who do poorly. It is natural to think that schools where most of the students are doing well must be far superior to schools where most of the students are doing poorly. But in the United States this is not the case, schools (within the range commonly found) make little difference. Move a poor student to a "good" school and they are likely to continue to do poorly, move a good student to a "poor" school and they are likely to continue to do well. Furthermore what differences do exist are predominantly due to peer effects, it is better to be surrounded by good students than by poor students. And of course it is not possible for everybody to have mostly high ability classmates.
One of the traits which helps you do well in schools is of course intelligence or IQ which the article doesn't mention at all. I do not find it surprising people with IQs of 115 do better in school and in their work careers than people with IQs of 85. But schools (in the US) have little effect on IQ and more spending on education cannot be expected to significantly reduce IQ differences and hence income inequality stemming from them.
Nor do I find it surprising that IQ is becoming more important in the job market. In 1920 there were over 25 million horses and mules in the US, by 1960 this number had fallen to slightly more than 3 million (see here). Pure muscle power used to be worth a lot in the economy, now not so much. There is a real issue here but more education isn't the solution.
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