How Much Is That College Degree Worth? It Depends on Where You Start

Photo (cc) by Rodney Martin

A college education is widely recognized as the best way to ensure higher career earnings. But new research reveals that the wage boost college grads experience is also largely determined by their socioeconomic status growing up.

Kids who grew up in low-income families experience a smaller “bachelor’s bump” in earnings than their cohorts who came from high-income families, according to a report from the Brookings Institution’s Brad Hershbein.

“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,” Hershbein writes. “Your actual level of earnings may not match others, but the percentage increase, relative to a high school diploma, ought to be comparable.”

But it’s not.

Hershbein says college grads who grew up poor and go on to earn a bachelor’s degree earn roughly 20 to 30 percent less than their degree-earning classmates who were born into a higher socioeconomic background. And the earning gap continues to grow over time. Hershbein writes:

Bachelor’s degree holders from low-income backgrounds start their careers earning about two-thirds as much as those from higher-income backgrounds, but this ratio declines to one-half by midcareer. For individuals without a postsecondary credential, the pattern is less marked. Those from low-income backgrounds initially earn 80 percent as much as those from a higher-income background, dropping to 70 percent by midcareer.

The report is based on data from the Panel Study of Income Dynamics, which has tracked the economic status of 18,000 Americans in 5,000 families since 1968.

So, what’s behind the earning gap in college grads who grew up poor and those who were raised with money?

“There are a host of possibilities, from family resources during childhood and the place where one grew up, to the colleges that low-income students attend,” Hershbein writes, adding that he and his colleagues are looking into those factors and others to determine their impact on earnings.

But considering a college degree is often touted as the best way to lift Americans out of poverty and fight income inequality, the research suggests that a more comprehensive approach to income inequality in the United States may be necessary.

“If a college degree is not the great equalizer we hoped, strategies to increase social mobility by promoting postsecondary education will fall short,” Hershbein explains.

Check out “College Degree Not Enough to Level the Field for Minorities.”

Are you surprised that a college degree is worth less if you grew up poor? Share your thoughts below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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