Piketty on higher education

Recently Thomas Piketty’s Capital in the Twenty-First Century seized the imagination of many Americans, reigniting debates about economic inequality (my review).  Meanwhile, our current crisis over education reform roars on.  What does this spotlit book say about higher education?

The short version: Piketty wants us to increase public spending on colleges and universities in order to help address income inequalities.

The longer version…?

The book’s main discussion of academia occurs in a section about wage inequality, as opposed to unequal ownership of capital, which occupies most of the text.  Piketty will ultimately remove higher education from this context, as we’ll see at the end of this post, but he begins the analysis by considering changes in income distribution, asking what role education plays in widening or narrowing inequality (304ff).

The first way into the problem occurs through Goldin and Katz’ Race Between Technology and Education (2010), which Piketty sees as deriving a supply and demand explanation.  Schooling provides students with skills which let them claim higher compensation in the marketplace, while technological innovations threaten workers who don’t reeducate quickly enough.  “Technological progress… generally increases the demand for new skills and creates new occupations.”

[I]f the supply of skills does not increase at the same pace as the needs of technology, then groups whose training is not sufficiently advanced will earn less and be relegated to devalued lines of work, and inequality with respect to labor will increase. (305)

Piketty accepts this concept, albeit grudgingly.  First, it doesn’t cover enough ground: “this theory does not explain everything… it does not offer a satisfactory explanation of the rise of the supermanager or of wage inequality in the United States after 1980″ (304).

Second, increased access to education sometimes keeps the unequal spread going.  Piketty cites a French example, where “all skill levels progressed at roughly the same pace, so that the inequalities in the wage scale were simply translated upward.” (306; emphasis added)  It’s credential inflation, in short: “a high school diploma now represents what a grade school certificate used to mean, a college degree what a high school diploma stood for, and so on.” (484)

That said, not having expanded educational access would have led to an even more unequal result (306).  Education doesn’t solve inequalities, but keeps them from becoming really unsettling.  That’s not the most inspiring slogan – like I said, it’s a grudging agreement.

A second approach to the education-inequality issue carries Capital to the American Ivy Leagues and back to the book’s overall focus on capital itself.  Piketty dives into the endowments of private universities with significant endowments, and finds the richest generating substantial returns, ranging from 6.2% for the least well endowed to an amazing 10.2% for Harvard, Yale, and Princeton (448).  The richer the endowment, the better its returns, and the richer the school becomes, and so on in a virtuous cycle of money.  The upper Ivies are, in short, the institutional equivalent of the 1%, and are also rentiers, capable of supporting themselves through capital income.

Piketty then links the institutional to the personal by looking at wealthy families’ strategies of leaving gifts.  He references one entertaining 2007 paper on this subject (pdf) which showed such charitable presents are often well-timed to aid family members’ acceptance into these campuses.  Archly: “[s]uch a finding does not seem entirely compatible with the idea of selection based solely on merit.” (485)

But it’s not just the 1% of schools and families that drive unequal access to education.  Setting aside the question of student aid and net cost (which Piketty misses, unfortunately), American academia is simply too expensive to not intensify inequality (486).  Therefore Capital accepts Goldin and Katz’s recommendation that nations invest more in academia in order to mitigate extreme inequality.

[I]f the United States (or France) invested more heavily in high-quality professional training and advanced educational opportunities and allowed broader segments of the population to have access to them, this would surely be the most effective way of increasing wages at the low to medium end of the scale and decreasing the upper decile’s share of both wages and total income. (307)

Later in the book Piketty pairs climate change with the idea of improving educational access as two of the greatest “challenges” to the human race.  Ameliorating schooling is even more important than fixing governmental debt: “the more urgent need is to increase our educational capital” (568)

However, even if America decides to reinvest in higher education, the top 1% can still boost their remuneration into the stratosphere for reasons beyond education (314-21), ultimately limiting academia’s role in shaping inequality.

Let me offer one extrapolation at this point.  Piketty doesn’t assign much political agency to higher education as a population, but does assume academia as a whole considers increasing inequality to be a problem.  To the extent that’s accurate, academics should support Capital‘s call for a global, progressive tax not on income, but on capital (515ff).  Are we seeing any signs of this?

But maybe, in the end, education isn’t all about economics.  Amid these reflections, Piketty  issues this assertion:

[T]he main purpose of the educational sector is not to prepare students to take up an occupation… [T]he ability to acquire knowledge and culture is one of the fundamental purposes of civilization. (308)

I’ve posted this quote to Twitter and Facebook, where it stirs a great deal of support and criticism. Piketty seems to want education to both be for economic and non-economic improvement.  That’s not a bad description of the way American academia views itself.