In The New Republic, Raghuram G. Rajan argues that income inequality is the real reason for the financial crash. Income inequality is one of the favorite themes of the left, but Rajan’s argument has some merit to it. He observes:

Economists argue over the reasons for the growing inequality—changes in taxation, increasing trade, weaker unions, stagnant minimum wages, and growing immigration have all been flagged. Perhaps the most important, according to Harvard professors Claudia Golden and Larry Katz, is that although technological progress requires the labor force to have ever greater skills, our educational system has not kept pace by providing the labor force with greater education and skills. While a high school diploma may have been sufficient for our parents, an office worker in many knowledge-based industries today can’t get hired without an undergraduate degree. Yet, according to Golden and Katz, rates of graduation from high school in the United States have barely budged since the 1970s, and neither have male graduation rates from college. For the middle class, that has meant a stagnant paycheck and growing job insecurity, as the old well-paying, low-skilled jobs with good benefits disappear.

There’s something to this: to get a decent job these days, one is practically required to have a four-year college degree. Employers won’t hire you without it. But the simple fact of the matter is that most people don’t need a four-year college degree. How much of that education is wasted? Is it really necessary for someone to spend four years partying, barely passing mediocre classes, delaying their ability to earn income for themselves, and taking on massive amounts of debt to do it? This process ends up leaving entire generations starting out in debt and without valuable skills. A college degree is simply a poor proxy for real-world skills. How many college graduates can’t balance their own checkbook. How does a humanities degree prepare one to be a manager? How many people actually use their degree unless they go into a specific profession?

All of that does create income inequality. We push people into getting an expensive degree when they don’t need it, and substantial portions of their income go into paying off that debt.

Ultimately, we have to take a new look at education in America. But that’s not easy. We have to reform K-12 education in this country—but good luck doing that if the teacher’s unions don’t get their demands met. We have to reform higher education, but right now student lenders, public and private universities, and educational companies all want to keep the gravy train running as long as they can. And the public has taken the idea that “education is fundamental” to the extreme—assuming that a college degree from a four-year institution is necessary to do jobs that don’t remotely require it.

And of course, most (but not all) of that pushback comes from the left, especially the politically powerful teacher’s unions.

Rajan is at least partially right: income inequality can be a problem, although it’s a stretch to say that it’s the cause of the crash. He’s also right that many of the steps that politicians have taken to address it have failed. If we want to have a country in which people have less debt, we can’t just look at housing or credit: we have to look at educational debt as well. And with the housing market, we are in the midst of a higher-education bubble, and that bubble is threatening to pop.

If we really care about income inequality, we need to stop pushing everyone into a one-size-fits-all system that leaves them with tens of thousands of dollars in debt before they ever have a chance to start working. Whether that means emphasizing technical and vocational education, whether that means more emphasis on non-traditional students, or whether that means tying student loans to academic performance, every option needs to be on the table.