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The Diploma Gap Between Rich and Poor

Author: Peter R. Orszag, Adjunct Senior Fellow
March 6, 2013
Bloomberg.com

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When people get more education, they become more productive and help strengthen the entire U.S. economy. So it is discouraging to see that students from wealthy families are increasingly more likely to graduate from college than are those from poor families. This perpetuates inequality from one generation to the next and limits the economic benefits that could come if a wider swath of the population earned college degrees.

The widening gap in college completion rates is documented in a paper by economists Martha Bailey and Susan Dynarski of the University of Michigan. Looking at children born in the early 1960s, the researchers found that only 5 percent of children from families in the lowest-income quartile completed college, while 36 percent of those from families in the highest-income quartile did.

For children born around 1980, the college completion rate among low-income students rose to 9 percent, but among high- income students it jumped to more than half (54 percent). In other words, over two decades, the college income gap widened to 45 percentage points from 31 percentage points. This widening was observed even after the researchers accounted for differences in students' cognitive skills.

It's tempting to conclude that the advantages of wealth and income have simply intensified, so the odds are increasingly stacked against poorer students. No doubt that's true to some extent, but Bailey and Dynarski show that most of the change has been driven by trends among female students. The gap between rich and poor in both college entry and college completion widened by almost twice as much for women as it did for men. (An astonishing 85 percent of girls born in well-off families around 1980 entered college.)

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