Does a College Education Really Translate to Higher Earnings? This New Graph May Shatter Myth.


The widely-held belief that a college education can break the cycle of poverty was handed a major challenge by a study from the Brookings Institution, which found that a college diploma’s salary earning benefit didn’t really hold up for graduates from poor families who over time didn’t fare that much better than their socioeconomic peers with only a high school diploma.

The February study, conducted by economist Brad Hershbein, examined if a college education spurs upward financial mobility. Based on the figures seen in the graph below, mobility may be more a factor of family background than the actual college degree.

 As seen in the graph published with the study, the earnings gap between poor and non-poor college graduates widens over time.
For college graduates who grew up in a wealthy family, the average salary peaks at age 50 at nearly $100,000. At the same age, college graduates born to poor families had an average salary of about $50,000 per year.

By age 60, college graduates born into poor families earned just about the same as their non-wealthy high school educated peers.

Hershbein explained:

If you are among the fortunate few who grow up poor and manage to earn a bachelor’s degree, you might reasonably expect your earnings potential to rise by the same proportion as that of other people who earn a bachelor’s degree. Your actual level of earnings may not match others, but the percentage increase, relative to a high school diploma, ought to be comparable. This is certainly the case in terms of gender and race. Many economists assume this pattern holds for those from different backgrounds in terms of income, too.

But it turns out that the proportional increase for those who grew up poor is much less than for those who did not. College graduates from families with an income below 185 percent of the federal poverty level (the eligibility threshold for the federal assisted lunch program) earn 91 percent more over their careers than high school graduates from the same income group. By comparison, college graduates from families with incomes above 185 percent of the FPL earned 162 percent more over their careers (between the ages of 25 and 62) than those with just a high school diploma.

The study did not offer an explanation for the earnings gap. Several people who posted comments on the Brookings website — reporting that they grew up in poor families and held college degrees — said they believe they were at a disadvantage because their families could not offer them networking advice and connections to leverage their degrees.

Read the full study at this link.

Does a College Education Really Translate to Higher Earnings? This New Graph May Shatter Myth.