College Education Doesn’t Guarantee Higher Income for Everyone

College- and career-readiness is the mantra of recent education initiatives; an expected outcome is higher wages, especially for college graduates, and a healthier economy. A new report from the Federal Reserve Bank of St. Louis examined the belief that a household led by someone with a four-year degree not only accumulates more wealth but is also protected against turbulent economic times.  While the researchers found that the statement is true for white and Asian families, they also found “Hispanic and black families headed by someone with a four-year college degree…typically fared significantly worse than Hispanic and black families without college degrees.”

“The long-term trend is shockingly clear,” said William R. Emmons, an economist at the Federal Reserve Bank of St. Louis and one of the authors of the report, to the New York Times. “White and Asian college grads do much better than their counterparts without college, while college-grad Hispanics and blacks do much worse proportionately.” 

While the report’s authors do not reach definitive conclusions to explain the data, they do cite a number of contributing factors.

  • White and Asian college graduates are more likely to a have graduate or professional degree.
  • Hispanic and black graduate income trends are not rising like they are for white and Asian graduates. In fact, median Hispanic and black college-grad incomes fell 10 percent and 12 percent, respectively, while the median incomes of their non-college counterparts rose 16 percent and 17 percent, respectively.
  • Black and Hispanic college graduate-led households were not in as secure a financial position before the Great Recession. The median debt-to-income (DTI) ratios among college-educated Hispanic and black families in 2007 were higher than those among white and Asian families.

The authors conclude that more research needs to be done on income disparities, but it is clear that “higher education alone cannot level the playing field.”

Read “Why Didn't Higher Education Protect Hispanic and Black Wealth?” by William R. Emmons and Bryan J. Noeth, In the Balance (August 2015)

 

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