Untangling the Relationship Between Educational Attainment and Earned Income By Race

Background and Purpose: The demand for higher education in past decades is partly driven by the link between education and socioeconomic status; the more highly educated people are more likely to gain better employment. Studies suggest that, in general, as educational attainment increases, earned income also increases. Although educational inequality still exists on some levels in the United States, the demand for education has increased. In spite of increased educational attainment over time, income inequality has skyrocketed in America. Since the 1970s, the income gap between individuals in the United States has grown faster than in other advanced Western democracy.  This disparity is even more pronounced by race.  In 1983, Whites net worth was eight times that of Blacks, and in 2013 that gap grew to thirteen. This study examined the relationship between educational attainment and earned income, as well as, the multiplicative effect of race and education (college, no college) on earned income.  Methods: Data from the 2013 Panel Study of Income Dynamics (PSID) was analyzed using SAS 9.4. Descriptive analysis and a four model, multiple regression were conducted. Results: The sample included 9,063 head of household respondents who are 57% White, 37% Black, and 6% missing or other; Blacks have a mean income= $27,654 and Whites have a mean income = $47,229;  and the mean percent for Blacks and Whites who attended college are 39% and 58%, respectively.  The results show a statistically significant relationship between educational attainment and earned income.  Those with a college education (b=20,641, t=6.05, p<.0001) earn substantially more income than those with a high school diploma or less. This study also found race (b=-18,264, t=-2.78, p<.005) to have a moderating effect on the relationship between educational attainment and earned income, while controlling for demographic, geography and health variables. College educated Blacks earned significantly less income than college educated Whites. Implications: Blacks who are college educated, are earning less than college educated Whites, indicating that the income disparity will continue to grow even if the barriers to education, for Blacks, are erased.  This finding shows a need to address labor market discriminations in order to address earnings discriminations by race.