01/15/2015 07:19 pm ET Updated Mar 17, 2015

Soaring Inequality Reverses Educational Progress

Last week, President Obama proposed the most ambitious education initiative since the G.I. Bill: making community college free by extending public funding for schooling beyond K-12. Such a policy would enable many low- and middle-income students to acquire the skills necessary for economic mobility in an era of rapid technological change. Obama's proposal comes at a time when the cost of college tuition -- both public and private -- has soared, making attendance difficult if not impossible for many households, the majority of which have suffered stagnant incomes since the 1970s.

Formal education has always been a critical component for upward mobility. Working class movements in the 19th century put pressure on governments to provide their children with education. Guaranteed schooling expanded to a full 12 years, and eventually even low-cost post-secondary schooling was greatly expanded between the end of World War II and the mid-1970s. But with soaring inequality, that progress is being reversed.

From 1830 until the mid-1970s, the U.S. possessed the world's best and most democratic system of education, providing its young with the world's highest quality education. But this advantage has withered away over the past decades. The high school graduation rate in the U.S. is now 79 percent, compared to 87 percent in the European Union. The U.S. ranks 12th in the share of 25-to 34-year-olds with college degrees. The World Economic Forum ranked the U.S. 52nd among 139 nations in the quality of its university math and science instruction in 2010.

What happened? Over the past 40 years, due to soaring inequality, the decline of unions and greatly weakened worker political power, the quality of education for the less privileged has deteriorated. Notwithstanding the fact that more young people are graduating from high school and attending college, the expansion has greatly slowed. Between 1960 and 1980, the share of the population enrolled in college increased by an annual average rate of 6 percent. However, between 1981 and 2012, that rate fell to 1 percent. The same trend is evident in the growth of college graduation rates, which fell from 4 percent to 2 percent over the same periods.

Inequality is further worsened as U.S. education fails to provide adequate preparation for so many young people facing the rising skill needs of the job market. As Claudia Goldin and Lawrence Katz note, economic success is significantly determined by the winner of the "race between education and technology." This is supported by an OECD report that shows that the "upskilling of the workforce" can combat rising inequality by increasing employment rates. In the developed world, 83 percent of people with a college degree have a job, compared to 55 percent for those with only a high school degree.

The corrosive effect of rising inequality on education is manifested in many ways. For instance, inequality has led to the polarization of neighborhoods, causing fewer of the rich and poor to attend the same schools. When the children of the wealthy attended public schools in larger numbers, some of their cultural capital rubbed off on the less privileged. They sat in the same classes, played sports and participated in other extracurricular activities together. They often attended the same social events and dated across blurry class lines.

But most importantly, politically influential wealthy parents had an interest in the quality of these public schools. However, over the past 40 years, the rich have increasingly retreated to gated communities and to sending their children to private schools. Consequently, the quality of public schools has declined as wealthy parents with political clout no longer have a stake in their quality. This shift has substantial economic ramifications: 64 percent of students graduating from a private high school attend college, compared to only 40 percent for those graduating from a public high school.

Exploding inequality, by putting yet more income and wealth in the pockets of the elite, have given them greater political influence. This clout has been used to cut taxes that fund public services which their children no longer need. As a result, Federal, state and local government budgets have been slashed, causing tuition payments by students to surpass state funding for public universities in 2012. In the 1970s, states provided their universities and colleges with 75 percent of their funding; by 2012, this fell to 32 percent.

As public and private tuition costs have exploded and worker household incomes have stagnated over the past 40 years, more students depend upon public education institutions. Federal help for these students has declined. In 1980, Pell Grants (awards to deserving students from households with less than $30,000 income, currently equal to a maximum of $5,730) fell from 77 percent of the cost of attending four-year public universities to 36 percent in 2011. Student debt has become the second source of household debt after mortgages; the average indebted graduate is burdened with $29,400 in student loans.

The educational achievement gap between children from rich and poor families is roughly 30 to 40 percent greater for those born in 2001 than those born in the mid-1970s and is now more than twice as large as the black-white achievement gap. Educational achievement is more strongly correlated with parental background in the U.S. than in 29 other countries in the study.

Soaring inequality has significantly slowed educational advancement and thus its ability to provide for upward mobility. And this failure in education increases inequality, a vicious cycle of ever-greater inequality and ever-more inadequate education.

If the U.S. is to remain internationally competitive and be able to offer future generations increased standards of living, rising inequality must be reversed. A means for helping achieve this reversal is to make Federal funding for public education increase and expand beyond K-12, and move to a P-16 model (preschool-to-college) like many European nations. Without such a shift, soaring inequality will continue corroding the educational foundation of our nation, causing our economy and society to become more unequal and sclerotic. President Obama's initiative deserves broad support.