Why has the return to education increased so much in recent decades?  The simplest explanation is that the supply of well-educated workers just isn’t keeping up with the demand.  Indeed, many claim that American educational attainment has been stagnant for decades.  This figure from the 2010 Digest of Education Statistics seems to back the stagnationists up:


The high school-or-more category virtually plateaued in the late 70s.  During the same period, the drop-out rate and the bachelor-or-more category continued to move in their historic direction, but at a snail’s pace.  If you had to pick a single adjective to describe this figure, “stagnant” is a good choice.

There’s just one problem: This figure isn’t for American educational attainment in general.  It only shows attainment for 25-29 year olds.  The first figure shows a flow, not a stock.  The next figure shows attainment for the whole population:


A radically different picture, no?  All three lines look virtually straight.  The stock of education has continued its historic rise since 1940 virtually without interruption.  How is this possible?  The elderly grew up in a low-education era.  As they die, average American education levels increase as a matter of pure arithmetic. 

Last question: What determines the supply of labor?  Is it the flow of workers, or the stock?  The answer, of course, is the stock.  The bottom figure isn’t a perfect measure of the stock of workers; you should probably remove retirees.  But “Americans 25 years and older” is clearly a much better measure of labor supply than “Americans 25-29 years old.”

Bottom line: Educational stagnation is probably coming soon.  But contrary to many, it hasn’t happened yet.

P.S. Coming soon: Goldin-Katz and the education plateau.