One of the more interesting trends in the contemporary economy is the growing importance of inequality occurring among college educated workers. We often think of education as contributing to inequality through the “college wage premium,” or the boosted earnings you can expect to receive if you get a degree. This premium is important and real. But lots of great research is coming out these days showing the massive amount of inequality occurring among the college educated. As an example, here’s a simulation I ran awhile back using census and American Community Survey data. I looked at the relative change of wage inequality between 1960 and 2019 (that’s the observed black line). Then I held two conditions at 1960 values: the college wage premium (blue line) and the amount of inequality occurring among college educated people (orange line). When a counterfactual line is further away from the black line, it contributes relatively more to the growth of inequality. You can see especially by the 2010s, inequality among college educated workers is more consequential for overall inequality trends than the inequality produced through the gap between workers with and without a college degree.
Recently, I’ve been curious about the extent to which folks with a college degree are ending up at the low end of the distribution. I took a quick peak at relative poverty rates, or household income, adjusted for household size, that is half or less the year specific median income. I used Panel Study of Income Dynamics data between 1970 and 2019, and looked at prime aged (25-54) year old individuals, stratified by educational attainment. Income is post-taxes and -tansfers.
Again, these don’t match official statistics because it’s a different conceptualization of poverty (relative poverty advocates argue that official poverty measures way undercount poverty) and the ages are restricted to 25-54.
Now, we obviously, obviously see that poverty is much more common among less educated individuals. By 2019 about 1/4 of noncollege educated workers were at or below relative poverty status. This has grown from about 10% in the 1970s.
But we also see that the percent of prime-aged college individuals in (relative) poverty has tripled over this time period, from about 2% to about 6%. Now, the odds of being not-poor are MUCH better with a degree. But a ~ 1 in 20 risk of poverty after a degree attainment is … not great. Definitely changes the stakes and the calculus and the risk of higher education.