Technology People and Productivity - Earnings, Inflation, And Sharing Productivity Gains

The data on this busy panel make four important points, one of which is rather obvious: (1) those with more education earn more; (2) earnings in actual, "as earned" dollars grow nicely; (3) when earnings are adjusted for inflation (in this case to 2000 dollars), the earnings curves flatten out; and (4) those with just a high school education benefit almost not at all from sharply rising productivity in the U.S. economy.

The bars represent current dollars, the curves constant dollars. A look at the results for these two groups shows that current dollar gains are impressive but that "real" results, measured in real purchasing power, are less phenomenal.

Educational Attainment	1975 Earnings	1999 Earnings	% Change
College or higher
Current dollars	14,081	52,883	275.5
2000 dollars	45,069	54,660	21.3
High School or higher
Current dollars	9,356	34,480	268.5
2000 dollars	29,946	35,693	19.2
High School Only
Current dollars	7,843	24,572	213.3
Constant dollars	25,103	25,398	1.2
No High School
Current dollars	6,198	16,121	60.1
Constant dollars	19,838	16,663	-16.0

People with college degrees or higher gained most. The second category includes them — averages them in — and also shows the earnings of those with "some college" and with Associate degrees. The High School Only category has increased its earnings in real dollars only by 1.2% in 24 years. In that period, productivity increased 49.6%.

Most tellingly of all, those who have less than a high school education (not included in the graphic) have lost earnings power in real terms. They have not only failed to keep up with inflation — much less productivity — they have been marginalized. In the sample from which these data are drawn, they represent 11.6 percent of 144.6 million people aged 18 or older.

The clear conclusion is that the modern economy depends on the better-educated layers of society. It is those from that layer who harvest the fruits of improving productivity. What does this portend for the future? That subject will concern us next.

Sources: Data on earnings from Current Population Surveys, March 2000. The Consumer Price Index, published by the Bureau of Labor Statistics, was used to deflate current dollar earnings estimates.