from the Richmond Fed
— this post authored by Urvi Neelakantan and Jessie Romero
For roughly four decades, the gap in earnings between workers with and without a college degree has been large. This persistent earnings gap is unusual from a historical perspective – in previous instances, workers have responded by increasing their level of education, and the resulting increase in the supply of more-educated workers has narrowed the gap over time. Over the past four decades, students have indeed enrolled in college at increasing rates; however, a large proportion of them have failed to earn degrees. Partly as a result of this bottleneck, the earnings gap has endured.
Why isn’t the U.S. producing more college graduates? Two key – and related – factors appear to play a role in college enrollment and completion: socioeconomic status and preparedness, broadly defined to include both academic preparation and the knowledge needed to make informed choices about college. For example, a large literature has documented the contribution of early childhood education to later academic (and labor market) success; children from lower-income families are less likely to have access to such education.
Children from lower-income families also are less likely to have the opportunity to attend high-quality elementary and secondary schools that enable them to make informed choices about their path after high school and succeed along that path. A challenge for policymakers, however, is that the evidence on what makes a school high quality is somewhat mixed and difficult to generalize from one school to another. This remains an important area of economic research, of interest not only to education and fiscal policymakers, but also to the Fed.
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Source
https://www.richmondfed.org/-/ media/richmondfedorg/publications/ research/annual_report/2017/ article.pdf
