The Impact of Low Income College Students on Inequality

August 18, 2014

College is generally a good investment. On average, people who earn a four year degree go on to make almost twice as much as those with only a high school diploma. But while those future high earners are in college, they tend to be relatively poor (speaking from experience here).

The relative poverty of college students has some big implications for how we look at inequality. We recently released a new report that takes a new look at the use of household income data and it’s implications for inequality.

Incomes are Low in College Towns

College towns are often home to the lowest-income places in the United States (table below).

The Fifteen Lowest-Income Places in the United States

Census Place

Number of Households

Median Household Income (2012 Dollars)

Mean Household  Income (2012 Dollars)

Higher Education

Boone, North Carolina

6221

$16,447

$33,173

Appalachian State University

Carbondale, Illinois

9601

17743

36495

Southern Illinois University

Athens, Ohio

6497

18428

41163

Ohio University

East St. Louis, Illinois

10612

19278

27732

 

Statesboro, Georgia

9850

20751

32586

Georgia Southern University

Opa-locka, Florida

5163

20757

30512

 

East Cleveland, Ohio

8074

20797

29280

 

Opelousas, Louisiana

6110

20983

33058

 

University CDP (Hillsborough County), Florida

16657

20992

28893

University of South Florida

Selma, Alabama

7812

22076

40092

 

Milledgeville, Georgia

5839

23580

39824

Central Georgia Technical College, Georgia College, Georgia Military College

Prichard, Alabama

8714

23726

32582

 

State College, Pennsylvania

12178

24104

45138

Pennsylvania State University

Pullman, Washington

10151

24125

47808

Washington State University

Oxford, Ohio

5730

24211

49458

Miami University

Source: U.S. Census Bureau, American Community Survey (Selected Economic Characteristics, 5-year Estimates).

Note: minimum 5,000 households.

According to U.S. Census Bureau data, Hillsborough County, Florida (the home of the University of South Florida) has a median income of just over $20,000 a year. It would be very easy for the common observer to assume that the residents of Hillsborough County have a relatively low quality of life, when in fact they have a bright future. 

One example: If you observed the tax data for surgeons, you would find very high degrees of inequality. Through their twenties, surgeons are in medical school and earning very little. Whereas, in their prime, with a proven track record and solid experience, they can earn $400,000 or more.

Economists and social scientists often consider low incomes as a sign of a lack of opportunity. Although that is sometimes very true, the opportunity costs of the situation must also be taken into account. Economist Alan Cole writes:

“A reasonable person would not say a construction worker is clearly better off than a business school student. And yet, it is the latter who benefits from progressive income taxes and refundable tax credits at the expense of the former. Use data unreasonably and you will get unreasonable results.”

The Growth in College Enrollment

Not only do post-secondary students predictably skew overall income data, they do it at an accelerating rate. Over 20 million students are currently enrolled in post-secondary education.

Since the late 1970s, we have seen post-secondary enrollment nearly double, from just over 10 million students to over 20 million students today.

This growth in post-secondary enrollment must certainly be considered in any discussion of changes in inequality.

To read the full report: click here

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