David A. Green and Kelly Foley | July 30, 2015
Income inequality is almost certain to be a central issue in the upcoming federal election. While parties may disagree on the importance of rising inequality and what they should do in response, one policy has near universal support. Indeed, it has become somewhat of a motherhood statement to say that we should address the problem of inequality in general, and the fate of the middle class in particular, by spending more on education.
On the face of it, this seems obvious. More educational opportunities would open access to good paying jobs for lower-income individuals and affect inequality in a very direct way. Also, each person who gets more education is one less person competing for jobs with other less educated workers and one more person competing for high-paid jobs with more educated workers. As a result, the earnings gap between more-and-less educated workers is likely to be reduced. Education provides other benefits as well. More educated societies tend to have higher productivity, better health outcomes and greater democratic engagement. This is why spending more on education is considered by many to be a silver bullet.
Given the way our system works, however, there is every reason to believe that broad-based spending increases in education wouldn¹t reduce inequality in the short- to medium-term, and may make it worse.
For education policy, as in so many things, the devil is in the details. To understand its impact, we need to look at its three main components.
First, there is spending on university education. We know that family income is strongly related to university attendance: children from families with incomes over $100,000 are much more likely to go to university than children from families with incomes under $30,000. If this difference was simply because lower-income families can¹t afford to send their children to university then we could close this gap by lowering tuition, improving access to RESPs and opening more seats in universities. But several studies indicate that while affordability is part of the problem, much of the gap arises due to differences in academic preparation and because high- and low-income families value education very differently. Under these conditions, lowering tuition and opening more seats would benefit middle- and upper-income families much more than lower-income families. In other words, it would actually increase inequality.
Affordability is less of an issue with the second component – college and apprenticeship programs because, compared with university, tuition tends to be lower and programs shorter in duration. But these programs face a different problem. Only between 40 and 60% of people who enroll in apprenticeships actually complete their program. That means expanding these programs and enticing lower-income people to participate in them runs the risk of leaving many with more debt but without a credential. A key reason for the high dropout rates appears to be that enrollees have insufficient skills in math and science. Training to become a plumber isn¹t just about learning how to turn a wrench; it includes calculating flow rates through pipes.
That brings us to the third area of education: pre-school, primary and secondary education. Here, more spending does seem to pay off. Better education at these levels, particularly when it is targeted at children from lower-income households, leads to improved university attendance and earnings later in life. Interestingly, there is evidence that increased monetary transfers to lower-income households through the Working Income Tax Benefit, for example when the children are young leads to better educational outcomes. Moreover, improving the teaching of K-to-12 math and science could help unleash the inequality-reducing effects of apprenticeships and university education that are there on paper but not in fact in the current system.
In the end, what we need is an integrated education system that provides better support for children from lower-income backgrounds at pre-school, primary, and secondary school ages. Once this is achieved then initiatives to improve access to post-secondary education will start to pay off. This is certainly an avenue to permanently reducing inequality in our society, but it¹s an avenue that will take time possibly, generations. In the meantime, we need to avoid getting distracted by facile claims that more education will solve all problems and get on with the hard task of finding policies that will actually reduce inequality now.
David A. Green and Kelly Foley are contributing authors of the forthcoming book Income Inequality: The Canadian Story published by the Institute for Research on Public Policy (irpp.org).