Things That Don’t Pay: College and Part Time Work

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Things That Don’t Pay: College and Part Time Work

We regularly scour the blogs and research papers of regional Federal Reserve branches, looking for interesting data-related analyses to highlight to you.

Here are two items that recently caught our eye:

#1. A June post by an Atlanta Fed economist highlighted the disparity between full time and part time labor when it comes to wage increases. Since the Great Recession, part time workers have seen 50-90% less wage growth than their full time counterparts. Prior to 2008, the gap was more like 25-30%.

One point of good news for part timers since that post: the June data showed a strong uptick in their wage increases, and the gap is now back to pre-Crisis levels (24%). Check out the first link below if you want to see this in graphical form, courtesy of the Atlanta Fed’s Wage Tracker tool.

Key takeaway: while insufficient to drive overall wage growth, the recent pickup in part time paystubs is a sign that wage inflation may finally be turning the corner.


#2. The economic benefits of a college or grad school degree are diminishing, according to work by NY Fed economists. They looked at two broad demographic cohorts (whites and African Americans), segmenting changes in expected income between those people born each decade between the 1930s and the 1980s. Their findings:

  • White workers with a 4-year degree born from the 1930s to the 1970s saw a +57 – 72% pickup in income over their non-college educated counterparts. Those born in the 1980s only saw a +43% improvement, however.
    African American college grads born in the 1980s are, however, still seeing income differentials in line with older cohorts (+71% versus +66 – 76% for those born in the 1940s to 1970s).
  • The data looks similar for those workers with a graduate degree. For white workers born in the 1980s, the differential to their peers without an advanced degree is +54%, lower than the +80 – 108% of older cohorts.
    For African Americans, the benefits of a graduate education remain consistently high (+73 – 125% more than those without a grad school degree) across all age groups.
  • Where things look really bad is when you look at total wealth differentials between the age groups. These include both financial assets and nonfinancial, such as home ownership.
    On that count, white families with a college educated household member who was born in the 1980s is +42% better off for their sheepskin, versus +134 – 247% for those born in the 1930s to the 1980s. Moreover, the older the graduate, the better the differential.
    The news is even worse for African American households, where those born in the 1980s are only +6% better off than their non-college educated peers. Those differences were +126% to +253% for those born in the 1940s to the 1970s.
    Exactly the same thing holds true when applied to graduate degrees: earlier born households accumulate much more wealth than later ones when compared to those who did not earn such a degree.

Key takeaway: to us, this looks like a solid data-driven indictment of the rising cost of US education, with its concurrent increase in student debt. A college and/or graduate degree does mean higher wages. But it also means more educational debt, which delays both savings and home ownership. The notion that younger demographic cohorts will deliver outsized economic growth, as their parents did when they were younger, seems suspect at best.