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Evidence says educational inequality is hurting the U.S. economy

Published: Monday, July 27 2015 7:41 p.m. MDT

An expanding earnings gap in the United States is creating a chasm between the nation's wealthy few and its cash-strapped majority. And, it feeds off a growing divide in educational opportunities afforded to rich and poor kids, according to stories in The Atlantic magazine and The New York Times. The parallel expansion of those gaps could hobble U.S. economic growth, say studies by the Organisation for Economic Co-operation and Development and the Brookings Institution.

Mind the gaps

An analysis of U.S. Census Bureau data shows that income inequality has grown in most parts of the United States since the late 1970s. On average, incomes fell by close to 6 percent among the bottom fifth of households between the late 1990s and the mid-2000s, while rising by 8.6 percent among the top fifth. And, incomes grew even faster — by 14 percent — among the top 5 percent of households.

During the same period, the educational achievement gap between rich kids and poor kids widened, too. That gap was 30 to 40 percent larger among children born in 2001 than among those born in 1976, according to a Stanford University study. The achievement gap between rich and poor students is twice as wide as the more well-known achievement gap between black and white students, the Stanford study showed.

As the American Dream’s promise of upward mobility through personal effort drifts out of reach for growing throngs of young people, hope in a prosperous future dims for everyone. A new book by the Brookings Institution Press, “Inequality in America,” states that a growing number of economists “suspect that once inequality passes a certain point it may jeopardize economic stability and economic growth,” according to The New York Times.

The U.S. is one of the major countries in which rising income inequality creates economic conditions that stifle upward mobility and make it harder for hard-working people to get the rewards they deserve, said a report for the OECD, a Paris-based international study group.

While the U.S. spends more on education per pupil than many other countries, inequalities in school financing and disparities in parental resources create an uneven playing field for American students, according to an analysis of the OECD report by the Center for American Progress.

Better rich than smart

More than ever before, getting the kind of education that leads to a well-paying job and secure future in the United States is dependent on already having the advantages of wealth. It’s getting harder and harder for low- and middle-income kids — even those who test smarter than their wealthier peers — to tap into the learning opportunities they need to get ahead in life.

Low-income students with above-average scores on eighth-grade tests have a college graduation rate of just 26 percent. That’s 4 percentage points lower than the college graduation rate for wealthy students with below-average test scores, according to data from The New York Times. Thirty years ago, a 31 percentage point spread separated the share of rich and poor students earning college degrees. That gap has since widened to 45 points.

Poverty isn’t the only disadvantage faced by bright kids from poor backgrounds, The New York Times story said. At college, low-income students face competition from peers who grew up with perquisites many poor kids lack, such as preschools, tutors, summer camps, music lessons and stable, prosperous families. Low-income students often miss out on guidance from family members, can be easily swamped by mounting debts, and might feel pressure to contribute income toward their families.

“The story of their lost footing is also the story of something larger — the growing role that education plays in preserving class divisions,” the story said. “Poor students have long trailed affluent peers in school performance, but from grade-school tests to college completion, the gaps are growing. With school success and earning prospects ever more entwined, the consequences carry far: education, a force meant to erode class barriers, appears to be fortifying them.”

Massachusetts microcosm

Massachusetts is home to America’s oldest school, Boston Latin, and oldest college, Harvard, and the state’s students place first in the U.S. Department of Education’s nationwide rankings. But, over the past 20 years, Massachusetts has also racked up the nation’s second-biggest increase in income inequality, according to the story in The Atlantic magazine. This, in a state that gave birth to education pioneer Horace Mann, who said in 1848 that “education, beyond all other devices of human origin, is a great equalizer of the conditions of men.”

Median incomes of families in Boston’s poorer suburbs have tumbled as factory jobs gave way to service industry jobs. Meanwhile, in the town's wealthy enclaves, hedge-fund managers tear down modest homes to build mansions supported by incomes that rose by 161 percent over the past two decades.

The wealth and education of Massachusetts’ upper 20 percent hasn’t translated to overall economic health. The Massachusetts economy fared even worse than the national economy over the past decade, according to a report by the think tank MassINC, which cites inequality issues as integral to the problem.

“A key component of the American Dream is to be able to secure and maintain a stable, good paying job that can support a family and be accompanied by health and retirement benefits,” said the MassINC report. “The poor job creation performance of the U.S. and Massachusetts economies over the past decade has led to fewer jobs that provide a middle-class standard of living, especially for men and women with no post-secondary degree.”

Family matters

Changes in societal structures have left low-incomes students disadvantaged by growing up in neighborhoods that increasingly segregate them by class, and concentrate their numbers in lower-quality schools. And, fewer low-income students enjoy the benefits of stable two-parent homes, said The New York Times.

Kids from poor areas, even the brightest ones, must also fight the gravitational pull of cultural forces that compete with their educational goals — including greater risk for early pregnancy, single parenthood and depression. The MassInc study reports that the continued rise in single-parent family formation contributes to a rise in poverty problems and widening disparities in child well-being.

To combat income and education inequality, the MassINC report suggests that:

• Colleges and universities should help students obtain paid internships and cooperative education opportunities while in college, and job placement assistance upon graduation.

• The real weekly wages and annual earnings of Massachusetts workers need to be improved, especially for those in the middle and bottom of the wage distribution.

• Public policies are needed to reduce high school dropout rates, increase post-secondary attendance and college completion, and expand training and apprenticeship opportunities for young adults without college degrees.

• Increasing tax incentives for marrying and staying married can contribute to the growth in marriage and family stability with favorable long-term effects for children.

EMAIL: cbaker@deseretnews.com

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