March 05--College is supposed to be the great equalizer -- the way to pull yourself out of a low-income background and position yourself for a better shot at the American Dream.
But does it work?
Yes, somewhat, but college is not as powerful as you might believe. Although low-income students do give themselves an earnings boost by getting a bachelor's degree, they don't come close to students from middle- or high-income backgrounds with the same degrees, according to a new study.
Those students end up earning 162 percent more over their careers than those who stopped their education after finishing high school, said one of the researchers, economist Brad Hershbein of the W. E. Upjohn Institute for Employment Research. But college graduates from low-income backgrounds only increase their lifelong earnings 91 percent.
"An increase of 91 percent is still pretty good," but it "is much less" than the 162-percent boost, said Hershbein.
That difference in lifetime earnings would likely be a shock for people who grew up poor and figured putting the effort into earning a bachelor's degree would help them like anyone else finishing college.
Along with economist Tim Bartik, Hershbein tracked people from age 25 to age 62, using family data collected in the national Panel Study of Income Dynamics. The researchers identified 25-year-olds from low-income backgrounds by focusing on families with children that qualified for free or low-cost school lunches through the federal assisted school lunch program. Their incomes were slightly above the poverty line. To meet the school lunch criteria, a family of four would have a $36,000 income, said Hershbein.
"The earnings gap between the poor and nonpoor college graduates also widened as time passed," Hershbein said in a recent report for the Brookings Institution. Immediately after college, the pay the low-income grads received was about a third lower than graduates who had come from families with more money. But by the time people reached midcareer, the advantage of a college education slipped. In their 40s, the college graduates from low-income backgrounds were making only half of what graduates from nonpoor households were earning.
By their late 50s, earnings for college graduates who grew up poor decreased substantially. Their earnings fell to the same level as at the start of their careers, the researchers report. The graduates who had been raised by higher-income families experienced some decline late in their careers, but a much smaller decline.
The researchers have not yet identified causes for the vast difference in pay and are continuing to dig through data.
