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Career Technical Education 5

Career Technical Education: Reducing Wage Inequality and Sustaining California’s Innovation-Based Economy

Jul 25, 2016

Income distribution in the U.S. and California has become far less equal since about 1980. Much of the rising disparity appears to be the result of increasing returns on capital assets relative to labor earnings (Piketty, 20141). This is reflected in the widening of wealth inequality more than income, but will likely initiate a negative feedback loop in which income inequality rises in the future.

Many other causes of the increase in income (wage) disparity have been proposed: Globalization has exposed low-skilled U.S. workers to foreign competition from Asia and other emerging economies; technological change has placed a greater value on highly skilled workers, lifting their wages relative to lower-skilled workers; institutional changes, such as the weakening of private-sector unions, have reduced workers’ bargaining power; the inflation adjusted minimum wage has declined; and the number of less-educated immigrants in the workforce has grown.

This list is not exhaustive, as many believe that financial deepening, measured by private credit in proportion to GDP3, accompanied by relatively less financial inclusion, has exacerbated inequality.

This analysis examines the role that skill acquisition, as measured by academic degrees obtained or average years of education, has played in rising wage inequality and how the gap can be narrowed by increasing opportunities for postsecondary career technical training. The difference in earnings for workers who receive postsecondary education compared with those with only high school education or less has widened over the past few decades. The magnitude of contributions from various sources may be debated, but the combined impact has been to reward workers who have higher skills. Career technical training will also help support California’s innovation-driven industries, where there are shortages of professionals in mid-level occupations.