Americans have done well in the past decade, but college graduates have really cleaned up. Between 1990 and 1998 (the last year reported by the government), BA holders' earnings rose by 18 percent after adjustment for inflation. People with graduate degrees did even better: 25 percent higher earnings over the eight years, after inflation. High school graduates without college, at the same time, saw earnings increases of only 11 percent after inflation. The financial payoff to a college education and to graduate training rose to an all-time high. The benefits go to those who actually finish college and receive a BA—there has been no sharing of the bonanza by those who receive two-year AA degrees or drop out of BA programs. Because college graduates were already at the top of the earnings distribution, the widening of the education gap contributed to the general rise in economic inequality noted during the decade.

What do college graduates do that puts them on the earnings escalator? The industries that hire large fractions of college graduates are technology users. They include business and engineering services, financial institutions, and the chemical industry. All these industries have workforces that are at least 25 percent college graduates. The most college-intensive industry is securities trading, where 58 percent of all workers have graduated from college.

Industries where college graduates have little role are decidedly low tech: restaurants, hotels, mining, and basic manufacturing, including paper, steel, lumber, and food. College graduates are 7 to 15 percent of the workforces of these industries.

The 1990s were the decade when the stock market rewarded technology. Although the most famous examples of big increases in technology stock prices were for technology producers—Cisco, Microsoft, Sun Microsystems—there were also huge increases in the value of technology-using firms. There is a striking relationship between college intensity and stock market return in the 1990s. Low-tech firms—those with less than 15 percent college graduates in their workforces—averaged annual returns of 16 percent over the decade, not far above historical averages for the market. High-tech firms with 25 percent or more college graduates averaged a stellar 25 percent per year. A dollar invested in 1990 in low-tech industries, defined in this way, became $4.40 this year, while a dollar invested in high-tech, college-intensive industries became $9.30, more than twice as much.

Technology-using industries have been good to their workers—mostly college graduates—and good to their shareholders. Along with the technology-producing electronics and software industries, they were dynamos of the economy.

It is unlikely that investors will earn such high returns in the coming decade. The fabulous bull market for technology makers and users has already cooled off, especially for Internet companies. But the message is durable that college matters. College graduates are the architects of the new economy, and they have been amply rewarded for that role.