One of the major benefits of higher education is the “college premium.” That’s the economic boost a graduate receives to their lifetime earnings as a result of getting a postsecondary degree. The common understanding is that the college premium is real, and justifies the costs of spending years in higher ed and accumulating debt thereby.
Recently the Federal Reserve Bank of St. Louis has been researching the financial returns to higher ed, and have just shared some results. Their analysis broke things down by birth decade (people born in the 1930s, 40s, etc.) and two races (black and white populations).
tl;dr version: based on historical data, college has paid off for graduates, but less well than it used to over time. Worse, college has always been good for individual income, but recently seemed to barely generate any wealth at all. My fear: future prospects aren’t good.
Let me offer a gloss.
First, undergraduate education really rewarded folks in older generations, especially white people, in terms of income. However, that reward seems to have declined generally over successive generations:
Notice that 1930s generation’s boom time. Note, too, the drop in the Reagan era: “for white grads born in the ‘80s, their incomes were meaningfully lower than those of previous generations.”
Similarly, graduate education’s income value was positive for everyone. Its value declined for whites over the decades, ultimately quite steeply, but described a more variable arc for blacks:
Then things change when the Fed looked not at income, but wealth. As they put it, “The Wealth Advantage Is Falling.”
Look at what happens to the impact of undergraduate degrees on wealth:
Look at the steady drop for whites, ratcheting down decade by decade. And for blacks?
Disturbingly, given the statistical uncertainty around our estimate for the wealth boost among black grads born in the ‘70s and ‘80s, we can’t say for certain that there even is a wealth advantage to a college degree for the average black family.
How about those with graduate degrees? “The fortunes of families holding postgraduate degrees are even dimmer”:
Look at those plummeting numbers for people born in the 60s and afterwards.
Among white postgrads, the wealth boost ranged between 403 percent and 276 percent for postgrads born in the ‘30s through ‘60s.
Compare that with those born in the ‘70s and ‘80s, which had 116 percent and 28 percent higher expected wealth than nongrads. The boost estimated for white grads born in the ‘80s is almost negligible after accounting for statistical noise.
Also bad: “The implication is shocking: Black postgrads born in the 1960s, ‘70 or ‘80s do not have statistically higher wealth than blacks who didn’t graduate from college.”
Negligible. Shocking. “[W]e can’t say for certain that there even is a wealth advantage to a college degree for the average black family.” These words aren’t coming from fly by night opinion piece writers or right-wing anti-intellectuals, but are written by sober economics writing for one of the nation’s major financial institutions.
I have questions:
- Why the income-wealth gap? Is this an expression of widening inequality, with the richest accelerating away from the rest?
- If those downward curves continue, what will the college premium be for people born in the 1990s and 2000s? When will they yield zero returns? When will they turn negative?
- Will people interpret this in terms of generations, rather than decades? (I will insert an obligatory and mordant “nobody will mention GenX” note.)