The multiplier effect of four-year degrees


There recently was a terrific Forbes column by thinkLaw’s Colin Seale titled, “The Equity Problem With Saying 'College Isn't For Everyone,’” in which Seale is exactly right to label four-year degree attainment an equity issue.

Are there some with four-year degrees who struggle economically? Of course. Are there some without four-year degrees who are economically well off? Also, of course. That said, the data is clear: There is no path to class and racial equity that does not include much higher bachelor’s degree attainment for those who grow up in nonaffluent and/or nonwhite households.

Seale presents data from the National Center for Education Statistics that shows that 25- to-34-year-old African Americans with bachelor’s degrees earn 65% more median earnings than those with a high school degree. For Hispanics, the median earnings premium is 49%; for women, it is 61%; and for Asians, it is 105%.

The median earnings premium for 25- to 34-year-olds also is substantial for those with a bachelor’s degree compared to an associate degree. For example, for African Americans, median earnings increase by $2,620 for those with an associate degree compared to those with a high school degree. For those with a bachelor’s degree compared to those with an associate degree, the median wage premium is $15,380.

What about student loans leaving young adults with a bachelor’s degree or more saddled with crushing debt? “The Financial Returns from College across Generations: Large but Unequal” report from the Federal Reserve Bank of St. Louis answers that question.

The report analyzes the contributors to family net worth based on respondents’ age, race, parents’ education (those three combined the report calls inherited characteristics) and then by whether the respondent has a four-year degree. The report calculates the amount of family net worth one earns by getting a four-year degree after taking out the net worth effects of one’s age, race and parents’ education. Outstanding student loans are one of the liabilities subtracted from net wealth.

The bottom-line finding is that for every combination of age, race and parents’ education analyzed, median family net worth increases for those who get four-year degrees, and for those who don’t get a four-year degree, it reduces median family net wealth. The gap between getting or not getting a four-year degree, no matter your inherited characteristics, is substantial.

Nonwhite families under 40 have the lowest net wealth of all the cohorts analyzed. Those with a college-educated parent have net wealth at the 22nd percentile of all families. But for those with a head of household with a four-year degree, net wealth is at the 29th percentile compared to the 18th percentile for those with a head of household that does not have a four-year degree.

Nonwhite families under 40 with neither parent having a bachelor’s degree have net wealth at the 24th percentile for all families. But for those with a head of household with a four-year degree, net wealth is at the 31st percentile compared to the 22nd percentile for those with a head of household that does not have a four-year degree.

Seale powerfully sums it up:

“Lastly, it is hard to hear experts claim that college is no longer necessary without asking a clarifying equity question: College is no longer necessary for whom? The over-representation of students representing the 1% of the wealthiest families in the United States at elite institutions suggests that college is still necessary for this overwhelmingly white population. Maybe they value the undeniable boosts to social capital resulting from being part of alumni networks that create lifelong connections that span generations. Perhaps they appreciate the intangible, but priceless benefits a broad liberal arts foundation provides, like equipping students for the 21st-century challenge of solving problems across disciplines. Affluent families are allegedly willing to lie, cheat and pay boatloads of cash to get their children into selective colleges, apparently owning the fact that merit is less important than access. It is inequitable to support a ‘college isn’t for everyone’ mentality that treats higher education as an obvious expectation for students from privileged backgrounds and as a luxury good for others. Simply put, as long as a four-year college degree continues to be a valid predictor of lifetime earnings with a multiplier effect for diverse populations, a key to long-term success in the 21st century workforce, and a reliable pathway for increased social capital, high schools ought to prepare all students to have a legitimate opportunity to successfully complete a four-year degree.”

Lou Glazer is president of Michigan Future Inc.

Facebook Comments