More Educated Than Ever, Still Unequal: The Fantasy Economy of Skills Shortages
by
Angela Valenzuela, Ph.D.
October 1, 2025
I have been reflecting on a newly-published essay by Neil Kraus, a political scientist from the University of Wisconsin–River Falls, published in the Summer 2025 issue of American Educator, as it hits close to home for those of us fighting for public education. Here is a summary, which I also plan to share with my students, as it is full of insights debunking myths about neoliberalism (‘capitalism on steroids’) and its intersections with labor market and education data.
Hao shows how the myth of endless high-skill opportunities obscures the exploitative underpinnings of the AI economy—data labeling, content moderation, and other hidden forms of digital labor—that mirror the same structural inequalities Kraus critiques. Both reveal how these myths function to misdirect blame toward schools while legitimating an economic system that thrives on inequality and dispossession.
It’s a story we’ve all heard. Business leaders, politicians, and the media repeat it so often that it feels like common sense: if only schools would do a better job, if only students worked harder, then prosperity would follow. But the data—and our lived experience—say otherwise.
The truth is that Americans are more educated today than ever before. Nearly 70 percent of adults have education beyond high school. And yet, roughly 60 percent of jobs still require nothing more than a high school diploma or less. A third of college graduates are underemployed, and about 40 percent of recent grads end up in jobs that don’t require their degrees. This mismatch—persisting for decades—shows that the economy remains dominated by low-wage service jobs, not high-skill opportunities.
The “skills gap” that business leaders love to talk about is not real. There’s an oversupply of well-educated workers, not a shortage. The same is true in STEM.Despite constant claims of a STEM shortage, such jobs make up only about 6 percent of the labor market, a share that has barely changed, and many STEM graduates remain underemployed. (Carnevale et al., 2023; Mishel & Bivens, 2021).
So why does this myth persist? Because it is useful—especially to corporate America. By blaming schools and colleges for economic inequality, corporations deflect attention away from their own role in depressing wages, offshoring jobs, busting unions, consolidating power, manipulating tax policy, and driving inequality ever higher. In this way, the “failure of education” becomes a convenient scapegoat, while the structural forces that actually shape the economy remain largely unchallenged.This is the heart of neoliberalism, the system ushered in during the Reagan years and still with us today.
Neoliberalism tells us that the market solves all problems and that public goods like education must be cut, privatized, or turned into revenue streams for the wealthy. It tells us to accept online education as the future, not because it’s better for students but because it saves money for administrators and enriches tech companies.
But we know better. Education is not the problem; inequality is. Americans are better educated than at any point in history, yet wages have been flat for most workers for over forty years while wealth has soared at the very top (Mishel & Bivens, 2021). That’s not on teachers, professors, or students—that’s on a political and economic system designed to benefit shareholders over communities.
While Kraus powerfully exposes the myth of the “fantasy economy,” his analysis unfortunately does not explicitly take up the question of race or gender. When we add that lens, the picture becomes even clearer—and more troubling.
Students of color have made significant strides in educational attainment over the past several decades. Black, Latino, and Indigenous students are graduating from high school and college at higher rates than ever before. Yet racial and gender wage gaps remain stubbornly wide, revealing the hollowness of the ‘great equalizer’ narrative
A Black worker with a bachelor’s degree earns less, on average, than a white worker with the same credential, while Latino and Indigenous workers face similar disparities (Carnevale et al., 2014; Gould, 2020; Scott-Clayton & Li, 2016). Hence, both systemic racism and sexism continue to structure labor market outcomes regardless of attainment.
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| Source: Gould, E. (2020). State of working America wages 2019. Economic Policy Institute. https://www.epi.org/publication/swa-wages-2019/ |
This racialized reality and gender gaps expose just how false the skills-gap narrative really is. If education alone could fix inequality, then rising attainment among communities of color and women would have narrowed economic gaps. But the opposite has often been true. What persists is not a failure of schools, but the endurance of structural racism and sexism in hiring, wages, and opportunity.
Moreover, neoliberal reforms that elevate STEM and “workforce readiness”—combined with such discourse as "return on investment" often come at the expense of Ethnic Studies and the humanities—fields that affirm identity, build civic capacity, and offer the critical perspectives that communities of color have long fought to preserve (Sleeter, 2011). By insisting that education’s value is only economic, the fantasy economy erases not only the realities of structural racism but also the democratic and cultural purposes of schooling.
To wit, analyses of race deepen Kraus’ argument that the attack on education is not just about shifting blame for inequality from corporate actors to schools—it is also about obscuring how racial capitalism continues to marginalize Black, Brown, and Indigenous communities, regardless of how much formal education they achieve (Taylor, 2016).
In summary, to reclaim education as a public good, we must expose the fantasy economy as a lie that justifies austerity. Education is not just job training—it is preparation for democracy, citizenship, and human flourishing.” The wealthiest country in the world can afford great schools and universities for every student. The question is not whether we can, but whether we will choose people over corporate profits. As Kraus credibly conveys, that’s the struggle before us.
References
Carnevale, A. P., Fasules, M. L., & Campbell, K. P. (2014). Race, ethnicity, and the college completion gap. Georgetown University Center on Education and the Workforce.
Carnevale, A. P., Smith, N., & Strohl, J. (2023). The recovery: Job growth and education requirements through 2031. Georgetown University Center on Education and the Workforce.
Gould, E. (2020). State of working America wages 2019. Economic Policy Institute. https://www.epi.org/publication/swa-wages-2019/
Hao, K. (2024). Empire of AI: Dreams and Nightmares in Sam Altman's OpenAI. Penguin Press.Kraus, N. (2025). The fantasy economy: Neoliberalism, inequality, and the education reform movement. American Educator, 49(3), 12–21.
Mishel, L., & Bivens, J. (2021). Identifying the policy levers generating wage suppression and wage inequality. Economic Policy Institute.
Scott-Clayton, J., & Li, J. (2016). Black-white disparity in student loan debt more than triples after graduation. Brookings Institution. https://www.brookings.edu/articles/black-white-disparity-in-student-loan-debt-more-than-triples-after-graduation/
Sleeter, C. E. (2011). The academic and social value of ethnic studies: A research review. National Education Association.
Taylor, K. Y. (2016). From #BlackLivesMatter to Black liberation. Haymarket Books.
