Annual Report 2016 | Federal Reserve Bank of St. Louis

Economic Literacy for Life

Invest in Human Capital to Build a Better Future

"Whenever I am asked what policies and initiatives could do the most to spur economic growth and raise living standards, improving education is at the top of my list." 1

—Janet Yellen | chair of the Federal Reserve

By Scott Wolla, Senior Economic Education Specialist

Scott Wolla

Meet the author,
Scott Wolla (above).

The knowledge and skills that people obtain through education and experience are referred to as "human capital" by economists. People invest in human capital for similar reasons that businesses invest in physical capital and individuals invest in financial assets—they hope to earn income.

The relationship between education and income is well-established: On average, those with more education tend to earn more income. In 2015, the median weekly earnings of a person (age 25 and over) with a professional degree were $1,730, while those for someone with a bachelor's degree were $1,137 and those for someone with a high school diploma were $678. The differences are dramatic.


Watch as members of a carpenters' union talk about building their human capital by using our training materials on personal finance.

The benefits of education don't end with higher income. The 2015 unemployment rates of the groups mentioned above are 1.5 percent for those with a professional degree, 2.8 percent for those with a bachelor's degree and 5.4 percent for those with a high school diploma.2

Earnings and Unemployment Rates by Educational Attainment, 2015
Earnings and Unemployment Rates by Educational Attainment, 2015 SOURCE: U.S. Bureau of Labor Statistics, Current Population Survey
NOTES: Data are for persons age 25 and over. Earnings are for full-time wage and salary workers.

There is also a relationship between education and wealth accumulation. Better-educated people not only earn more dollars but are more efficient in translating income into wealth (assets minus liabilities).3 There are many factors that explain differences in wealth, but part of the story lies with the way well-educated families handle their money: They are more likely to have liquid assets to sustain a financial rough patch, they are more likely to have a diversified financial portfolio and they are more likely to keep debt low relative to assets.

So, the quip stands—education pays.

Family Financial Outcomes Based on Education

Education* Percentage of families Median income (2013) Median wealth (2013) Wealth-to-income ratio** Millionaires (family wealth)
No high school diploma 12% $22,320 $37,766 1.43 1 in 110
High school diploma 50% $41,190 $95,072 2.15 1 in 18
Two- or four-year degree 25% $76,293 $273,488 3.45 1 in 4.6
Advanced degree 13% $116,265 $689,100 5.58 1 in 2.6

SOURCES: Boshara, Ray; Emmons, William R.; and Noeth, Bryan. "The Demographics of Wealth: How Age, Education and Race Separate Thrivers from Strugglers in Today's Economy." Essay No. 2: Education and Wealth, Federal Reserve Bank of St. Louis, May 2015, pp. 4, 5, 9, and 13; 2015-Education-and-Wealth.pdf.
NOTES: *Based on the education level of a family headed by someone 40 years of age or older. **This ratio shows how much wealth each group has per dollar of income. For example, the ratio for families without a high school degree was 1.43, which means that, on average, for every $1 of income there was $1.43 of wealth. The ratio is a measure of how efficient people are at turning income into wealth.

Economics and Civic Literacy

The benefits of education extend beyond the income and wealth of individuals. Economic knowledge is part of basic civic literacy. Being a thinking, voting and productive member of society requires an economic understanding of the world in which we live.

However, an even rudimentary understanding of this basic economic framework appears to be missing in the United States.4 This has implications for larger society. Understanding the issues being discussed in the public square today requires working knowledge of the trade deficit, budget deficit, monetary policy, banking regulation, financial markets and tax law, to name a few of the key topics.

Further, living in a representative democracy grants citizens the ability to influence policy through their interactions with policymakers. Former Federal Reserve Gov. Frederic Mishkin suggested that as policymakers listen to their constituents, a "better-informed citizenry makes for better economic policymaking."5

Education and Productivity

Human capital is also a key contributor to productivity—workers with more education and skills tend to produce more output. Recently, the rate of productivity growth has slowed—from 2.5 percent during the years 1995 to 2010 to 0.4 percent from 2011 to 2015.6 This has economists concerned because productivity is a key driver of economic growth, real wages and living standards.

Recent research suggests that rising human capital explains about 20 percent of the growth in U.S. productivity from 1950 to 2007. The researchers estimated that educational attainment has been growing at about one year per decade, which has contributed about 0.6 percentage points to productivity growth per year.7 However, they warned that the growth in educational attainment has started to slow, which means that its contribution to economic growth—and income—will probably diminish as well.

As such, human-capital development is not only about individual income and wealth or even responsible civic behavior; rather, it has implications for the future growth of the economy and the standard of living of its citizens.

Shared Goals

How does this relate to the goals of the Federal Reserve System? The Fed has a congressional mandate to promote price stability and maximum sustainable employment. To understand how the Fed works toward these twin goals, people must be familiar with basic economic concepts. Former St. Louis Fed President William Poole said that while the Federal Reserve Act did not mention "the Fed's obligation in educating the nation's populace in economics, it has been an implicit mission from the start."8 And as former Fed Chairman Ben Bernanke said, "The Federal Reserve's mission of conducting monetary policy and maintaining a stable financial system depends on the participation and support of an educated public."9

Scout Dad

Listen to Don Bertier, the father of a Boy Scout, talk about his son’s use of St. Louis Fed resources to earn a personal management merit badge.

"That was probably the best class I've ever seen put on."

This necessitates a deliberate strategy to lay the conceptual foundation for understanding how the economy works. People must understand the principles of inflation, unemployment and economic growth to assess whether the Fed is achieving its mandates. But, to be understood, these concepts require cognitive support. Underneath these concepts—the "bones" if you will—lie economic concepts such as scarcity, choice and opportunity cost. Upon that foundation lie the factors of production and supply and demand. And then comparative advantage.

Librarian Trevor Dawes

Listen to Trevor A. Dawes, a university librarian, talk about working with the St. Louis Fed to help students and staff learn more about handling their personal finances.

"The library is a boundary-spanning organization."

And so the structure gets built from the ground up. It doesn't appear overnight. The St. Louis Fed provides economic literacy support by providing high-quality (award-winning) lesson plans, online modules, publications, podcasts, videos and professional development opportunities for people of all ages. In this way, the St. Louis Fed provides the means by which people can increase their own human capital.

Echoing the need for this, Bryan Jordan, a member of the St. Louis Fed's board of directors, noted, "It doesn't matter whether you are young or whether you are old. The ability to connect the concepts of sound financial management with being able to participate in the economic vibrancy of communities, whether it be buying a house, getting a credit card or getting a job, are all important."

Watch as two of our outside board members talk about the need in their communities for personal finance and economic education.

Added Karama Neal, a member of the Little Rock Branch's board of directors, "There is such a need for people to understand how economics works, both personally and in the larger economy. "

"The St. Louis Fed has wonderful economic‑education materials. I've used them myself."

A few of our resources to help build human capital and civic literacy:

  • Read Education, Income and Wealth, a short, easy-to-follow essay in the January 2017 edition of Page One Economics that discusses the links between education and both income and wealth.
  • Watch Saving for College, a short video that follows a high school student as she learns about investing in human capital, factors to consider when choosing a college and ways to finance a higher education.
  • Listen to the The Labor Market, an episode in the Economic Lowdown podcast series, to hear how a young person looking for that first job can learn about labor market basics: the role of education, supply, demand, productivity and government regulation.

For these and hundreds of other resources, start at

About the Author
Scott Wolla has been a senior economic education specialist at the Federal Reserve Bank of St. Louis since 2010. Prior to the St. Louis Fed, Scott taught history and economics in Minnesota for 14 years. He has taught economics and personal finance throughout the country. He is the principal author of the St. Louis Fed's Page One Economics publication and has written numerous articles, lessons, book chapters and curricula on economics and personal finance for K-12 classrooms. [ back to text ]



  1. See Yellen. [ back to text ]
  2. See Employment Projections. [back to text]
  3. See Boshara et al. [ back to text ]
  4. See Lusardi. [ back to text ]
  5. See Mishkin. [ back to text ]
  6. See data in FRED (Federal Reserve Economic Data) at [ back to text ]
  7. See Fernald et al. [ back to text ]
  8. See Poole. [ back to text ]
  9. See Fernald et al. [ back to text ]


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