Which education policies can prevent the collapse of the middle-income group?

•This study addresses the issue of widening income inequality and evaluates education policies.•We consider the elementary and higher education sectors with the price of education.•The race between the levels of elementary and higher education is crucial to widening inequality.•The collapse of the middle-income group decreases the levels of income for all individuals.•Elementary education policy should precede higher education policy to prevent its collapse.

This study addresses the issue of widening income inequality and evaluates elementary and higher education policies. Unless education policy increases the level of elementary education more rapidly than that of higher education, it will become more difficult to prevent the collapse of the middle-income group because of the increasing price of education. This collapse of the middle-income group would subsequently decrease the levels of income for all individuals. Whereas education policy affects the levels of both elementary and higher education, elementary education policy should precede higher education policy as long as the direct effect of policy outweigh the indirect effect.