I have ordered their new book, after seeing it mentioned in David Leonhardt's column in the New York Times. An excerpt from the book is here.
For cohorts born from the 1870s to about 1950, every decade was accompanied by an increase of about 0.8 years of education. During that 80-year period the vast majority of parents had children whose educational attainment greatly exceeded theirs. Educational change between the generations then came to an abrupt standstill.
As a result, we went from a pattern in which inequality was falling as the average standard of living was rising to a pattern of increasing inequality.
Two questions arise. First, why has education attainment stagnated? Second, why has average productivity growth remained high in the face of this stagnation?
My answer would be assortative marriage. We are dividing into a two-tier society, where the top tier produces children capable of obtaining advanced skills and the bottom tier does not. I will be curious to see how Goldin and Katz answer those questions.
A related puzzle is why some young people choose to forego graduating high school and attending college, given the high average returns from more schooling. Some hypotheses:
1. They are making rational decisions, in that for them, the marginal returns from additional schooling are low.
2. They are making irrational decisions, due to myopia or other factors.
3. They are making poor decisions because they are cash-constrained.
(3) is politically correct, but my guess is that (1) is more relevant empirically. Again, it will be interesting to see what Goldin and Katz have to say that bears on this.