Ch. 10
Why has the earnings gap between better- and less- educated workers widened?
There has been an increase in the demand for skilled workers due to technological advances, international competition, and changes in the mix of output. At the same time, the supply of less-skilled workers has increased by a steady flow of immigrants. The demand for low skilled workers has decreased as firms have found it advantageous to outsource low-wage goods to other countries.
According to Table 10.1, the unemployment rate for high school dropouts is just under twice that of college graduates for males ages 25-64.
False
Determining whether the income distribution accurately reflects performance ability is possible, although difficult.
False
Differences in human capital are usually large and easily observable.
False
Each step up the education ladder improves the incomes of white males but not of black males.
False
Getting and holding a job does guarantee financial success.
False
Incomes, IQ, and educational attainments are all distributed similarly.
False
Labor force participation is similar for males ages 25-64 with different levels of education completed.
False
More education guarantees a higher income and escaping poverty
False
More education would by itself lead to many more jobs being available
False
The earnings gap between better- and lesser- educated workers has held steady.
False
We infer the distribution of income from the distribution of abilities.
False
Why do minorities and women earn less income than comparably educated white males?
For minorities, some of this reflects differences in the quality of education, say between inner city and suburban schools. For minorities and women, decisions as to subjects/majors selected through voluntary choice, societal steering, or possibly even genetics could play a role. Discrimination in education and the labor market, either current or past, is relevant
Education may determine who is poor, but may have little impact on how many people are poor. Explain
If employers hire based on skills (with education as a proxy), beginning with the most skilled and continuing until they have sufficient labor, then one's education will affect how likely one is to be poor. The number of people who are hired will depend on how many workers are demanded by employers (the demand for labor), and that is a function of the strength of the overall economy.
In what ways is education a sorting device for employers?
In practice, employers typically hire based on just a few selection criteria; educational attainment is one of the most important. They assume that more schooling results in greater skills and ability. Perseverance in school also signals a certain disposition to achievement. An employer may even feel that school graduates "deserve" better opportunities. An educational degree is a cheap, easy, and fairly reliable mechanism for sorting out job applicants
Higher educational attainment contributes to income in several ways. Enumerate these.
It increases people's productivity (human capital) by expanding their knowledge and skills. Employers tend to regard educational degrees as proof of commendable diligence. Educational institutions typically offer job placement services
What does figure 10.4 suggest as to the relationship between the distribution of income, education, and IQ?
It suggests that the links between ability and income are far from perfect. There is a higher concentration of low incomes than either low IQ or low education. High educational attainments are more common than high incomes or high IQ. The income distribution is even less representative of innate capacities than is suggested by its observed relationship to IQ. Educational attainments depart considerably from the IQ distribution.
According to Table 10.2, just over 3% of college graduates are under the poverty line.
True
College graduates will earn over $1,000,000 more on average than high school dropouts before retiring.
True
Even if, on average, better-educated individuals can earn more money, all persons with more schooling will not necessarily have higher incomes.
True
Over 20% of high school dropouts are under the poverty line.
True
The income distribution of college graduates overlaps that of high school dropouts.
True
The median earnings of college graduates are more than 60% greater than that of high school graduates for males ages 25-64.
True
The presumption that ability breeds economic success finds empirical support.
True
The simple correlation between educational attainment and income is very strong and consistent.
True
What are some of the difficulties in measuring innate capacity and in measuring developed performance?
We still don't know precisely what innate abilities are or how to measure them. When we instead focus on developed performance, we must recognize that we are departing from the pattern of innate abilities because all individuals do not share equal opportunity to develop their capacities. Another problem with the measurement of performance ability is the fact that no single, all-inclusive performance criterion exists.