In our current economy, the need for a college education becomes increasingly valuable despite the high cost of tuition and loans. The demand for skilled, college-educated laborers is high. A college education can also determine your future income potential and in many cases, it is the only way a person can climb up the socioeconomic ladder. There are two theories that suggests why the need for a college education has been growing -- increased international competition and skill-biased technology.

The first theory focuses on the globalization of the U.S. economy. The argument is that increased competition from low skilled labor abroad has decreased the wages of low-skilled workers at home. At first, this theory seems to make sense but the statistics do not make sense. The reason is that only a small portion of the US economy is actually subject to competition from abroad. Also, job competition is growing in both the most and the least trade-affected industries at about the same rate. (Irons, 1998)

The second theory for the increase in need for a college education has been called "skill-biased technological change". The idea is cur

In Dimensions of Inequality, Diaz-Geminiz, Quadrini, and Rios-Rull theorizes the financial inequality in the U.S. according to the labor earnings, income, and wealth among U.S. households. Labor earnings are the amount of salary taken home as a result from working. Total income includes labor earning plus any additional income, such as stocks or savings accounts, and even income from government transfers, like Social Security and Welfare. And lastly, wealth represents the total stock of past savings.

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Hines, John S. (1998, April 01). Education and Income Distribution. New York: General Internet Inc.

rent technology favors the higher skilled, higher educated workers over lower skilled workers. An example would be the increase use of computer technology has helped in the productivity and wages of the computer users and programmers. But, this increase does not help increase stagnated wages of the "lesser" educated worker who does not know this new technology. The only problem with this theory is that technological growth is a difficult to measure. There are two many hard to define variables to statistically measure this kind of change. (Irons, 1998)

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