Career earnings of low-income graduates lag

College is supposed to be the great equalizer – the way to pull yourself out of a low-income background and position yourself for a better shot at the American Dream.

But does it work?

Yes, somewhat, but college is not as powerful as you might believe. Although low-income students do give themselves an earnings boost by getting a bachelor’s degree, they don’t come close to students from middle- or high-income backgrounds with the same degrees, according to a new study.

Those students end up earning 162 percent more over their careers than those who stopped their education after finishing high school, said one of the researchers, economist Brad Hershbein of the W. E. Upjohn Institute for Employment Research. But college graduates from low-income backgrounds only increase their lifelong earnings 91 percent.

“An increase of 91 percent is still pretty good,” but it “is much less” than the 162-percent boost, said Hershbein.

That difference in lifetime earnings would likely be a shock for people who grew up poor and figured putting the effort into earning a bachelor’s degree would help them as much as anyone else finishing college.

Along with economist Tim Bartik, Hershbein tracked people from age 25 to age 62, using family data collected in the national Panel Study of Income Dynamics. The researchers identified 25-year-olds from low-income backgrounds by focusing on families with children who qualified for free or low-cost school lunches through the federal assisted school lunch program. Their incomes were slightly above the poverty line. To meet the school lunch criteria, a family of four would have a $36,000 income, said Hershbein.

“The earnings gap between the poor and non-poor college graduates also widened as time passed,” Hershbein said in a recent report for the Brookings Institution. Immediately after college, the pay the low-income grads received was about a third lower than graduates who had come from families with more money. But by the time people reached mid-career, the advantage of a college education slipped. In their 40s, the college graduates from low-income backgrounds were making only half of what graduates from non-poor households were earning.

The researchers have not yet identified causes and are continuing to dig through data.

Hershbein said the choice of majors and careers could be a factor. It could be that the poor are attracted to careers where they help others – positions that often are low-paying.

Another possibility has been suggested by other studies: Students from low-income backgrounds tend to choose lower-quality colleges. Studies show that the quality of a college – not just a degree – matters. More selective colleges may provide a broader network for students, giving them advice on how to advance and introductions to people who can help them.

Hershbein said low-income students who would qualify for more selective colleges often don’t apply to those colleges.

Growing up in low-income communities, the students haven’t seen their friends going anywhere but state college nearby, he said. And selective colleges also “are not reaching out to low-income students.”

This story was originally published March 23, 2016 at 10:19 AM with the headline "Career earnings of low-income graduates lag."