Updated Aug 1, 2018

The college wage gap is real for Americans of color

Having a college degree has generally meant higher wages and better jobs, and the pay-off continues to be significant for white Americans. But there's a penalty for African-American women: they earn less than white women having the same credentials, economic data shows.

Why it matters: As they keep raising tuition, colleges risk tipping the cost-value balance and losing minority groups. "Eventually college wouldn’t be worth it,” Lisa Barrow, a senior economist at the Federal Reserve in Chicago, tells Axios.

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Note: Underlying data is inflation-adjusted to 2017 dollars. Data includes hourly wages for all wage and salary workers. Salaries were calculated out to hourly amounts by EPI. Data: Economic Policy Institute; Chart: Chris Canipe/Axios

How to read the chart: The blue and orange lines show the change in inflation-adjusted hourly salary and wages since 1977. For instance, in the last chart of the second row, Hispanic men with a college degree make 13% more than they did in 1977, while those with only a high school diploma make 5% less.

The big picture: Many minorities already face extreme disadvantages in getting accepted and affording a college education. Even if an African-American or Hispanic adult earns a degree, the financial reward still doesn't match those of whites, according to data from the Economic Policy Institute.

But the alternative is worse. While earning a bachelor's degree may not increase an African-American man's wages as much as a white man's, not going to college is likely to lead to 12% lower pay than high school-educated African-American men earned 40 years ago.

  • Overall, men without a degree are worse off, making 10% less than male high school grads did in 1977 — regardless of race.
  • Meanwhile, women have made overall gains on the gender pay gap. Without a college degree, their wages are 9% higher than 40 years ago.
  • And women are now more likely than to men have a college degree — over 2 million more women enrolled in college last year than men, according to the National Center for Education Statistics.

But there are benefits to college beyond higher pay:

  • Young adults with a college degree are less likely to be living with their parents, Pew Research's Richard Fry tells Axios.
  • They are more likely to get married, and to marry someone else with a college degree, giving them a significant advantage in terms of overall household earnings.
  • College degrees also tend to lead to more consistent, full-time work, says Barrow, which is often more important than a high hourly wage.

How we got here: Bill Emmons, assistant vice president at the Federal Reserve in St. Louis, tells Axios that economists generally say the pay-off disparity is natural and can be explained by differing skills, fit and job choice.

  • Sociologists tend to attribute the trends to racial discrimination by employers and universities.
  • But another explanation is the structure of American society. Barriers in the U.S. political, economic and social systems often disadvantage minorities, Emmons said.
There’s this history of discrimination — going all the way back to slavery and colonialism — and exclusions that have persisted. And it stands to reason that these have left enormous imprints not only in institutions but also in individuals' expectations.
— Bill Emmons

What's next: The economic impact of racial inequality has declined, according to economist Roland Fryer, but not fast enough.

  • Opportunity for minorities and whites is converging, but "there’s still a gap that doesn’t look like it’s going away any time soon," Emmons said.
  • In terms of solutions, improving the quality of and access to education — from pre-K to post-grad — still seems the best way to combat these issues, he said, but "education is not the silver bullet."

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