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Principles of Economics- Mankiw (5th) 408

Principles of Economics- Mankiw (5th) 408 - 420 PA R T S I...

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420 PART SIX THE ECONOMICS OF LABOR MARKETS CASE STUDY THE INCREASING VALUE OF SKILLS “The rich get richer, and the poor get poorer.” Like many adages, this one is not always true, but recently it has been. Many studies have documented that the earnings gap between workers with high skills and workers with low skills has increased over the past two decades. Table 19-1 presents data on the average earnings of college graduates and of high school graduates without any additional education. These data show the increase in the financial reward from education. In 1978, a man on average earned 66 percent more with a college degree than without one; by 1998, this figure had risen to 118 percent. For woman, the reward for attending college rose from a 55 percent increase in earnings to a 98 percent increase. The incen- tive to stay in school is as great today as it has ever been. Why has the gap in earnings between skilled and unskilled workers risen in recent years? No one knows for sure, but economists have proposed two hy-
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