College-educated families usually earn significantly higher incomes and accumulate more wealth than families headed by someone who does not have a four-year college degree. The income- and wealth-boosting effects of education apply within all racial and ethnic groups. Higher education may also help “protect” wealth, buffering families against major economic and financial shocks and mitigating adverse long-term trends. Based on two decades of detailed wealth data, we conclude that education does not, however, protect the wealth of all racial and ethnic groups equally.
Compared to their less-educated counterparts, typical white and Asian families with four-year college degrees withstood the recent recession much better and have accumulated much more wealth over the longer term. Hispanic and black families headed by someone with a four-year college degree, on the other hand, typically fared significantly worse than Hispanic and black families without college degrees. This was true both during the recent turbulent period (2007-2013) as well as during a two-decade span ending in 2013 (the most recent data available).
Why didn’t higher education protect Hispanic and black family wealth from either short-term turbulence or long-term competitive pressures? Job-market difficulties specific to Hispanic and black college graduates probably played a role, especially over the longer term. Financial decision-making appears even more important in explaining large wealth declines among Hispanic and black college-educated families during the Great Recession and its aftermath.
Higher education typically boosts income and wealth. The first row of Table 1 shows differences in 2013 median income between families with college degrees and families without. The median income among all families headed by someone with a degree was 2.4 times the median income among families headed by someone without such a degree. The ratio was somewhat larger among whites and Asians than among blacks and Hispanics, but all were within the range of two to three times.
Table 2 shows that higher education is even more strongly associated with wealth accumulation. The typical college-educated family had between three and 10 times more wealth than its racial or ethnic counterpart without a degree. The white and Asian wealth ratios shown in the table are noticeably larger than those of blacks and Hispanics. One reason why the income and wealth ratios are highest among white and Asian college graduates is that they are more likely than black or Hispanic college graduates to have graduate or professional degrees. Advanced degrees typically provide significantly higher earnings and are strongly associated with greater wealth accumulation.1
It begins early with Madison’s long term disastrous reading results.