Do College Degrees Mean More Wealth?

College degrees usually indicate higher income and wealth over those without. But this premium for those born more recently is getting smaller.

During a recent Dialogue with the Fed event, Assistant Vice President and Economist William R. Emmons discussed trends in income and wealth premiums for those with bachelor’s degrees and those with postgraduate degrees. His discussion was based on recently published research on the returns to college education, done with Ana Kent and Lowell Ricketts, both with the St. Louis Fed’s Center for Household Financial Stability.

Their research grouped families by birth year of the head of household, then further segmented the groups by race and ethnicity. They found that income and wealth premiums for those who graduated college have been generally trending down for subsequent birth decades. This was especially true for the wealth premium.

As an example, the income premium for non-Hispanic white families born in the 1930s was 75% for those with bachelor’s degrees and 112% for those with postgraduate degrees. However, those premiums fell to 48% and 59%, respectively, for similar families born in the 1980s.

In fact, in no case was the income or wealth premium highest for a family grouping born in the 1980s; this includes premiums among non-Hispanic Black families and Hispanic families of any race. All groups had at least one decade that experienced higher premiums, with most having multiple decades seeing higher premiums.

Additional Resources

• Dialogue with the Fed: What Is a College Degree Really Worth?
• On the Economy: Is College Always the Answer?
• On the Economy: Wealth Building Efforts beyond College and Owning a Home