The Economic Value of Education by Race and Ethnicity

From 1980 to 2004, real average hourly wages grew from $14.47 to $17.51, an increase of 21 percent. However, this increase in average hourly wages over 25 years masks important differences in wage growth for low- and high-wage workers, as well as differences in growth rates over time. Notably, many people became concerned about rising wage inequality over the 1980s; their concerns were driven in part by declines in real wages at the bottom of the wage distribution. Between 1980 and 1990, wages at the 10th and 50th percentiles fell by 7.3 and 1.7 percentage points, respectively, compared with real wage growth of 6.4 percentage points at the 90th percentile. This increase in inequality and falling real wages in the bottom half of the distribution led many politicians and policymakers to consider several policies aimed at improving earnings among low-wage workers, including increasing the minimum wage and expanding the earned income tax credit. In addition, because higher wages are associated with more years of schooling, many argued in favor of education and training programs to boost wages of the lowest skilled workers.