CONCEPT
The Skill Premium
The wage differential between college-educated and non-college-educated workers — the economic price of higher education — whose stagnation and potential reversal in the AI era signals a fundamental shift in what the labor market values.
The skill premium is the ratio of wages paid to college-educated workers relative to workers with only a high school education. For four decades — from roughly 1980 to 2015 — the premium rose dramatically in the United States, reflecting growing demand for the non-routine cognitive skills college education was presumed to develop. By 2015, the college premium had plateaued, and emerging evidence suggests it may be declining for recent cohorts in fields most exposed to AI. This possible reversal carries enormous implications: it challenges the central policy response to inequality for the past generation (more education, more skills), and it suggests that AI's labor-market effects may differ qualitatively from earlier computerization by automating the skilled cognitive tasks that previously commanded the premium.
In The You On AI Field Guide
The rising skill premium was the central fact of labor economics in the 1990s and 2000s. Goldin and Katz's influential 'race between education and technology' framework