Peter Orszag delivered a speech yesterday called “The Case for Reform in Education and Health Care” that included a number of interesting slides. Here’s one:
As you can see, family income has a big influence here. Two thirds of the kids with average math scores and low-income parents wind up not going to college, while almost two-thirds of high-income kids with average math scores do go. And as he shows in the following slide, parental income also has a strong impact on college completion:
This, in turn, has a substantial impact on a person’s long-term economic prospects as seen in our country’s large and growing wage premium:
On the one hand, this represents a cycle of substantial social injustice. People who have the misfortune of being born to poor parents have a much worse chance of going to college than do those born to wealth parents and this, in turn, has bad implications for their future earnings prospects. Given these facts, various efforts to reduce the tax burden on the estates of multimillionaires is obscene. The children of the wealthy have plenty of advantages in life besides what they inherit. Taxing that money and using it to provide some opportunities for those who aren’t well-born should be a no-brainer.
This situation is also a major drag on our economic growth. The rising college wage premium reflects the fact that labor market demand for college graduates is growing more rapidly than the percent of the population graduating from college. That’s good for college graduates, but bad for the economy as a whole. The private lenders and their congressional allies who are blocking billions in additional financial aid for poor students by insisting on taking a “cut” worth billions a year are slowly-but-surely strangling the economy.