Earlier this month, the Federal Reserve Bank of St. Louis released the latest edition of the State of US Wealth inequality. If you want to know why young adults are bypassing their local community colleges, the report sheds some light on the impact of the wealth gap.
First, young adults understand the value of money. Gen Z adults and the youngest Millennials have $1.25 in wealth for every $1 that Gen X adults had as young adults, and $1.26 for every dollar of wealth that Baby Boomers had at that stage in life. If anything, today’s young adults are both savers and investors. Their relationship with money is complex. If they enroll in a post-secondary program, they face the prospect of being ensnared in long-term educational debt. After graduation, they must contend with trying to build wealth in the most expensive, least fluid housing market in history.
According to the report, educational benefits (in the form of wealth accumulation) accrue to those who earn a four-year college degree. Using this cohort as a benchmark, households headed by a person with college credit but without a four-year degree have $0.30 in wealth for every $1 in wealth held by a household headed by a four-year college graduate. Households headed by a high school graduate have $0.22 of wealth for every $1 of wealth by a four-year graduate. Households headed by someone who did not finish high school have $0.09 of wealth for every $1 of wealth held by a university graduate.
The wealth gap between a bachelor’s degree and an associate degree (or an incomplete college education) is $0.70. Comparing the wealth gap between an associate degree and a high school diploma is just $0.08.
Community colleges must address the wealth gap
Why is this? Because the average annual earnings of a community college graduate are not remarkably different than those of a high school graduate. There is very little excess income in a community college graduate’s household, so there is no mechanism for them to establish and/or accumulate wealth.
It is an unmistakable sign that community college executives have failed to ensure that the diplomas their institutions issue have maintained their value in the face of competition, inflation, and technological advancement over time. There is no reason a community college degree should have an income potential that exceeds the income potential of a high school diploma by a few thousand dollars per year.
Community colleges need to leave behind the “subsistence wage” arena immediately and focus on delivering programs that increase the wealth gap between themselves and the nation’s high schools and decrease the wealth gap between themselves and the nation’s universities.
The wealth gap is an indictment of virtually the entire community college strategy of substituting short-term training programs for authentic education. Doing so makes the community college less comparable to four-year universities and more comparable to high schools. Further, four-year universities are finding it increasingly difficult to accept transfer students from community colleges due to the decrease in academic rigor.
Community colleges assure their students that their earned credits will transfer to universities, but most universities transfer these credits as “electives” with limited application to four-year degree requirements. Worse, many of these transferred “elective” credits interfere with late-stage financial aid eligibility if the student remains enrolled through completion of a degree program.
No one should wonder why young adults are bypassing community colleges. Exactly what do they have to offer?
Photo Credit: State Farm, via Flickr
