Non-Technical Summary:
Economic growth for much of the 20th century supported America’s promise of offering opportunities to both parents and their children. In the thirty years between 1947 and 1977, a period in which gross national product per capita doubled, the incomes of families in the lowest income bracket nearly doubled as well. In contrast, the last 35 years have been marked by increasing income inequality, with stagnant incomes for families at the bottom of the distribution and sharp increases for those at the top of it.
What might be the implications of increasing income inequality for the educational attainment of children growing up in poor and affluent households? This paper examines children’s attainment measured with years of completed schooling as well as college attendance and graduation. Specifically, we track changes in income inequality and educational attainment between children born into low- and high-income households in the U.S. between 1954 and 1985. Our data comes from a single source– the U.S. Panel Study of Income Dynamics (PSID) – which (1) provides consistent, high-quality measures of income, (2) enables us to link family income in adolescence to schooling completed a decade later, and (3) supplies measures of important family demographic conditions.
Our primary goal is to attempt to account for the increase in the attainment gap with changing gaps in family income as well as other demographic factors (increasing mother’s education, and falling family sizes, two-parent family structure, and mother’s age at birth). Across all 31 birth cohorts, we find that increases in the income gap between high- and low-income children account for about three-quarters of the increasing gap in completed schooling, half of the gap in college attendance and one-fifth of the gap in college graduation. We find no consistent evidence of increases in the estimated associations between parental income and children’s completed schooling. Increasing gaps in the two-parent family structures of high- and low-income families accounted for relatively little of the schooling gap because our estimates of the (regression-adjusted) associations between family structure and schooling were small. On the other hand, increasing gaps in the age of mother at the time of birth accounts for a substantial portion of the increasing schooling gap because mother’s age is consistently predictive of children’s completed schooling.