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Back to School: How Educational Economics is Leading to a Wider Gap Between Rich and Poor

July 31, 2012

By Sheila Bapat, RH Reality Check

In mid-July, Federal Reserve Chairman Ben Bernanke weighed in on the long-term economic benefits of "high-quality" early childhood education by pointing out that a child who receives a high quality education from the start has a much greater chance of achieving economic prosperity later in life. What Bernanke didn't mention is what this means for parents: A high-quality education, not to mention other related expenditures, can cost a lot of money—that is, if you have money to spend.

These costs are rising: Last week, for example, the National Retail Federation released the results of its annual survey, finding that families expect to spend 14 percent more this fall than last fall on school-related items. If accurate, that could bring spending by people with school-age children to an average of $688 this year. Sixty percent of surveyed parents expected to buy some type of electronic device.

In the current economy, who can afford this much back-to-school spending, let alone stellar preschools? The NRF’s announcement last week does not delve into the income brackets of those it surveyed. But a recent study of parents' spending on children in the United States by scholars Sabino Kornrich and Frank Furstenberg—a study that spans more than 25 years—paints a much more detailed picture of what educational expenditures really mean.

The study shows that upper-income American families currently spend nine times as much as low-income families on children. The gap has nearly doubled since 1972. The study also found that children from higher-income families are at a clear advantage in terms of educational expenditures, as "their parents can and do spend more on childcare, preschool, and the growing costs of post-secondary education."

Our culture tends to romanticize pregnancy and parenting, particularly when it comes to women's lives. But the cold, hard, financial reality of what it takes to provide for a family and give a child everything necessary to compete in an increasingly economically-stratified country quickly puts a damper on that romance. And, as is often the case, there are gender dynamics at work as well. Kornrich and Furstenberg found that the woman of a household tends to put more resources toward children and more of her own earnings into child-related expenses. It makes wage disparities in pay—something about which Congress definitively decided to do nothing last month when it rejected the Paycheck Fairness Act—all the more problematic.

When it comes to educational performance, and socioeconomic mobility in general, these income and gender pay disparities matter. The capacity to spend if not the actual dollars spent on a child's education is linked to his or her educational success. Earlier this year the New York Times reported on a study by Stanford scholar Sean F. Reardon demonstrating that income is tightly related to academic performance. Reardon's study looks in depth at the correlation between income and standardized test performance, finding that that between 1960 and 2007, the gap in standardized test scores between affluent and low-income students had grown by nearly 40 percent.

Low-income is defined by the U.S. Census Bureau as earning $45,000 or less per household. Nearly 150 million Americans fall into this category--and over half of those who are poor or low income are women. Since 2007, the last year of Reardon's study, the percentage of Americans and women considered low-income has consistently risen.

Perhaps most problematic, as Reardon's study points out, is the fact that parents' education predicts their earnings. It's much harder today for parents who are not highly educated to substantially increase their earnings, and to then in turn help their children reach a higher socioeconomic status.

All of this points to the "feedback mechanism" Reardon discusses in his study: cyclical socioeconomic trends that can inhibit income and class mobility. Children whose parents are poor now may face a tougher time throughout their lives in getting out of their current socioeconomic situation. Reardon writes:

As the children of the rich do better in school, and those who do better in school are more likely to become rich, we risk producing an even more unequal and economically polarized society.

It may be good news for the economy that there are parents who feel like they can spend more on their kids for school this year, but the trends connecting income, education spending, and achievement send troubling signals about how economic class affects the educational achievement of children—and what it means for your child's life if you simply can’t afford what the Joneses have.

Against this economic backdrop, the push to force women to carry their pregnancies to term (a rights violation on its face) has consequences reaching far beyond just the women themselves. It has long-term effects on the socio-economic prospects of those children as well.

CEPA Publications

In this chapter I examine whether and how the relationship between family socioeconomic characteristics and academic achievement has changed during the last fifty years. In particular, I investigate the extent to which the rising income inequality of the last four decades has been paralleled by a similar increase in the income achievement gradient. As the income gap between high- and low-income families has widened, has the achievement gap between children in high- and low-income families also widened?

The answer, in brief, is yes. The achievement gap between children from high- and low-income families is roughly 30 to 40 percent larger among children born in 2001 than among those born twenty-five years earlier. In fact, it appears that the income achievement gap has been growing for at least fifty years, though the data are less certain for cohorts of children born before 1970. In this chapter, I describe and discuss these trends in some detail. In addition to the key finding that the income achievement gap appears to have widened substantially, there are a number of other important findings.

First, the income achievement gap (defined here as the average achievement difference between a child from a family at the 90th percentile of the family income distribution and a child from a family at the 10th percentile) is now nearly twice as large as the black-white achievement gap. Fifty years ago, in contrast, the black-white gap was one and a half to two times as large as the income gap. Second, as Greg Duncan and Katherine Magnuson note in chapter 3 of this volume, the income achievement gap is large when children enter kindergarten and does not appear to grow (or narrow) appreciably as children progress through school. Third, although rising income inequality may play a role in the growing income achievement gap, it does not appear to be the dominant factor. The gap appears to have grown at least partly because of an increase in the association between family income and children's academic achievement for families above the median income level: a given difference in family incomes now corresponds to a 30 to 60 percent larger difference in achievement than it did for children born in the 1970s. Moreover, evidence from other studies suggests that this may be in part a result of increasing parental investment in children's cognitive development. Finally, the growing income achievement gap does not appear to be a result of a growing achievement gap between children with highly and less-educated parents. Indeed, the relationship between parental education and children's achievement has remained relatively stable during the last fifty years, whereas the relationship between income and achievement has grown sharply. Family income is now nearly as strong as parental education in predicting children's achievement.

This chapter is now published in the book Whither Opportunity: