By many indications, the world has finally left the worst of the 2008 economic crisis behind. Growth is looking to pick up in the U.S. and Japan, spurring what the OECD labels as a moderately positive global economic environment. Unemployment is slowly but surely retreating, and investors are regaining their confidence in the markets.
As the recovery becomes more solid, and the existential fears of total economic collapse recede, income inequality has again moved to the forefront of the global agenda. This is certainly true in the United States, where stagnant wages and high unemployment have stoked popular concern over declining living standards. Just weeks ago, President Obama used his State of the Union address to highlight that over the past few years, “inequality has deepened [and] upward mobility has stalled” — statements that were followed by his announcement of a new strategy to reverse these trends through executive actions like raising the minimum wage for federal contract workers.
Elsewhere in the world, too, growing economic disparity has gained center stage. At her September 2013 speech to the United Nations’ General Assembly, Brazilian President Dilma Rousseff called the fight against poverty and inequality “the greatest challenge of our time.” She went on to announce her intention to reinforce Brazil’s socially inclusive economic development model.
Even the centers of global finance are beginning to recognize the urgency of the problem. At the World Economic Forum’s most recent annual gathering of the world’s mightiest economic players at Davos, the audience listened to Pope Francis exhortations to fight inequality and his criticism of the “widespread social exclusion” that has accompanied global capitalism. Indeed, the Forum itself declared economic inequality to be “a major risk to human progress, impacting social stability within countries and threatening security on a global scale.”
Unsurprisingly, with the rising attention being paid to inequality, political leaders are adopting increasingly partisan positions in their efforts to offer solutions. One side focuses on the need for equality of opportunity, and argues than any government action beyond that will reduce incentives for risk taking, innovation, and economic growth. Another faction argues that policymakers must guarantee some level of equality in baseline outcomes, through tax policy, social spending or other wealth transfers. Both sides seem unwilling to compromise, however, and as long as inequality is reduced to an ideological struggle, gridlock seems inevitable.
But there is at least one major policy area whose potentially transformative impact on inequality is being overlooked: education. Over the long term, effectively fighting poverty and inequality must require giving everyone the opportunity to not only have decent work, but ultimately develop their own capabilities to the fullest extent. And improving education, by inculcating both “hard” and “soft” skills that citizens need for 21st Century workplace, is the most politically feasible and technically plausible mechanism available to increase economic and social mobility.
This is the argument of Josh Kraushaar, writing recently in The Atlantic. The bottom line, he writes, is that “poorer children aren’t afforded the same educational opportunities as wealthier ones.” This original sin of the education system is then exacerbated over time, as wealthier children with better educations reap greater cumulative income gains over the course of their lives, while poorer children fall further behind — a cycle that transmits poverty and ramps up inequality over generations.
The scope of this challenge is overwhelming, especially in a region like Latin America. As Worldfund estimates, while 92 percent of Latin American children enter primary school, far fewer make it to the end of secondary school — in Brazil, that number is 41 percent, and in Mexico it is only 35 percent.
Even worse, the low quality of the education that Latin American students do receive paints a bleak picture of their future prospects in a globalized world economy. Alarmingly, some 50 percent of Mexicans, Colombians and Brazilians don’t have the ability to understand basic math and science. Complicating the problem, there are huge variations in levels of education investment and outcomes within each country, particularly between urban and rural areas.
Technology, often held up as unequivocally good thing, is also contributing to widening an already steep divide. Jobs requiring high tech skills — and thus, a good education — provide increasingly high returns, while wages for low skill jobs stagnate or fall. As noted economist Tyler Cowen argues in his book Average is Over, “Workers more and more will come to be classified into two categories … the key question to get most jobs may become: ‘Are you good at working with intelligent machines or not?'”
A similar theme permeates the arguments of MIT scholars Erik Brynjolfsson and Andres McAfee in their recent book, The Second Machine Age. While technology rewards some jobs, they point out, it also “diminishes demand for previously important types of labor, which can leave many people with reduced incomes.”
Unless we can find a way to provide these people with better tools with which to take part in this new “machine age,” inequality will only continue to rise. Education is one of the few ways — perhaps the only way — that we as a society can change the fundamental problem of wage divergence, rather than just mitigate its worst aspects. Now, its up to our political leaders to put aside their partisan bickering and put education back on the agenda where it belongs.