Professor Dennis A. Ahlburg Trinity University San Antonio HACU Annual Conference October 10, 2016
Income Inequality 1979 2007 Source: Thompson, Derek. Income Inequality is Not a Myth. Theatlantic.com. 1
Real Median Household Income by Race and Hispanic Origin: 1967 2015 2
What Has Happened Recently? 3
Market Income Trends 2007 2015 Source: Gary Burtless, Income growth has been negligible but (surprise!) inequality has narrowed since 2007, http://www.brookings.edu 4
Percent Loss of Income across the U.S. Income Distribution in the Great Recession (2007 2009) Source: Gary Burtless, Income growth has been negligible but (surprise!) inequality has narrowed since 2007, http://www.brookings.edu 5
Income Gains 2015 First increases in median household income since 2007 Poverty rate decreased Poverty rate decreased 14.8% to 13.5% (46.6m to 43.1m) Median income increase 5.2% Growth for lowest 10% 7.9% Growth for top 10% 2.9% But overall, no change in inequality Increase for households: Hispanic 6.1% White 4.4% Black 4.1% 6
Education and Earnings Source: Autor, David H. Skills, education, and the rise of earnings inequality among the other 99 percent. Sciencemag.org 7
Value of a College Degree Source: Autor, David H. Skills, education, and the rise of earnings inequality among the other 99 percent. Sciencemag.org 8
Poverty and Education: Persons Aged 25 and Older, 2015 30 25 Percent in Poverty 20 15 10 5 0 Not HS Grad HS Grad, No College Some College Bachelor's or More Education Source: US Bureau of the Census, 2016, pp. 60 256. 9
Does Higher Education Contribute to Lower Income Equality? Declining educational wage differentials explain much of the decline in wage inequality, 1915 1980. BUT Increasing wage differentials explain a majority of the increase in inequality after 1980 (Goldin & Katz, 2007). Estimates range from 55% to 95% Of particular significance is the dramatic increase in returns to postbaccalaureate education (Lemieux, 2007). 1979 2007 real wage growth 4 year degree 10% post baccalaureate 26% 10
Earnings Inequality Within Higher Education Gini Coefficients (2010) High School Diploma 0.317 Some College 0.317 Associate s Degree 0.293 Bachelor s Degree 0.354 Master s Degree 0.360 Professional Degree 0.388 Doctoral Degree 0.374 Inequality within higher education has increased over time. Source: ww.census.gov/hhes/www/income/data/incpouhlth 11
Why Has Earnings Inequality Within Education Increased? 25% of the increase in income inequality among the college educated is explained by the increasing concentration of resources at more selective colleges (Hoxby & Long, 1999) Number of freshman seats grew 300%, 1955 2005 (Hoxby, 2009) 1967 most selective schools spent 4.5 times as much per student as lowest selectivity schools 2006 they spent 7.7 times as much (Hoxby, 2009) At lower ranked public universities, declining resources explain 75% of declining graduation rates At community colleges, the influx of less well prepared students explains 90% of the decline (Bound, Lovenheim, & Turner, 2010) 12
How Does Rising Inequality Affect Colleges and Universities? 69% students at most selective colleges are wealthy 51% pay full tuition At most selective colleges, increasing inequality: Demand increases Increases tuition Increases spending Increases financial aid Makes it more difficult to admit low income students 13
Some Concerns 14
Cumulative Debt WHITE 32% 10% 13% 18% 12% 16% HISPANIC 27% 11% 14% 17% 14% 17% BLACK 14% 11% 12% 16% 15% 32% ASIAN 43% 12% 14% 17% 7% 7% TOTAL 30% 10% 13% 18% 12% 18% No Debt Less than $10,000 $10,000 to $19,000 $20,000 to $29,999 $30,000 to $39,000 $40,000 or More Source: Trends in Student Aid. CollegeBoard.org. 15
Students by Sector All Asian Black Hispanic White Sector of Bachelor s Degree Public Four Year 57% 63% 52% 59% 56% Private Nonprofit Four Year 26% 23% 21% 23% 28% For Profit 9% 5% 19% 11% 7% Source: Trends in Student Aid. CollegeBoard.org. 16
Parents Income All Asian Black Hispanic White Parents Income for Dependent Students Less than $30,000 16% 27% 34% 28% 11% $30,000 to $64,999 22% 28% 28% 27% 19% $65,000 to $105,999 27% 9% 20% 25% 29% $106,000 or More 36% 26% 18% 21% 41% Source: Trends in Student Aid. CollegeBoard.org. 17
Time to Degree All Asian Black Hispanic White Time Elapsed Between First Enrollment and Degree Completion Within 4 Years 39% 46% 28% 31% 42% 5 Years 21% 19% 19% 21% 22% 6 Years 10% 11% 11% 13% 9% 7 to 9 Years 12% 11% 14% 15% 10% 10 Years or Longer 19% 14% 29% 20% 17% Source: Trends in Student Aid. CollegeBoard.org. 18
Where Does Inequality Begin? Only 4% of low income youth will reach highest income category Kids need knowledge about how the system works the rules of the game Life choices/chances affected by Parents education and involvement Schools Neighborhoods Critical is parents who direct their children s educational experience but not too much 19
In sum: Inequality rises dramatically to 2007 Top lost a lot in Great Recession Good economic news lately Big payoffs to higher education Increasing inequality within education Higher education now reinforces inequality Some worrying indicators for Hispanic and Black students Inequality starts early culture? 20