Boys from low-income families who live in areas with greater income inequality are more likely to drop out of high school than similarly disadvantaged boys living in other areas. That finding comes from Income Inequality, Social Mobility, and the Decision to Drop Out of High School, a new paper released by the Brookings Institution as part of its conference series and journal on economics.
Furthermore, while research from the Alliance for Excellent Education shows that high school graduates earn, on average, $8,000 more per year than high school dropouts, the potential for higher earnings alone is not enough to offset the negative impacts of income inequality and keep students from dropping out of school, according to the Brookings paper.
“This really changes the way economists think about the role of income inequality and incentivizing kids to stay in school,” explains Melissa Kearney, Brookings nonresident senior fellow, coauthor of the paper, and an economics professor at the University of Maryland.
The paper examines the connection between income inequality (the extent to which income is distributed unevenly in a location) and social mobility (the likelihood that an individual will move up or down in the income distribution). “Greater educational attainment is a key pathway by which an individual from a low-income background can move up in the income distribution and obtain a middle class life,” the paper explains. So the Brookings researchers focus on the connection between high school dropout rates and the income gaps between households in the bottom (10th percentile) and middle (50th percentile) of the income distribution.
Traditionally, economists believed that income inequality had an “aspirational effect” that incentivized individuals to invest more in themselves to achieve a higher income position in society, explains Kearney. Since higher levels of education typically command higher salaries, greater income inequality must reflect a greater return on educational investment, thereby encouraging students to stay in school.
But “[t]he data is telling us something different,” Kearney explains. “The data is telling us that on average, kids, boys in particular, who are growing up in low-income homes if they’re in a place with greater gaps between the bottom and the middle, they’re less likely to stay in school, they’re less likely to invest in their own education.”
“Instead of incentivizing them to stay in school and invest more in themselves, it’s causing them to think why bother,” she continues. “The middle class life is so far from my own, that maybe it’s not worth it to stay in school because I’m not going to be that person.”
Essentially, greater income inequality creates the perception that economic success is unattainable and diminishes the perceived value of staying in school for youth from low-income families. Kearney and her coauthor Phillip Levine, an economics professor at Wellesley College, refer to this phenomenon as “economic despair.”
The researchers find that states with greater income inequality have higher dropout rates. In states like Louisiana, Mississippi, Georgia, and the District of Columbia, which have high levels of income inequality, one-quarter or more of students who start high school do not graduate within four years, the paper says. By comparison, less than 10 percent of students do not graduate on time in Vermont, Wisconsin, North Dakota, and Nebraska, states where income is distributed more evenly between poor and middle class households.
Boys from low-income families seem particularly vulnerable to the negative impacts of income inequality. “Low-SES [socioeconomic status] boys in high inequality states are almost 6 percentage points more likely to drop out of high school than low-SES boys in low inequality states,” the paper says. Additionally, for boys from low-income families, moving from a low inequality state to a high inequality state increases the likelihood of dropping out of high school by 4.1 percentage points, the paper says. The researchers examine several possible explanations for this link, including residential segregation, disparities in education funding, and demographic composition, among others. Ultimately, the findings suggest that the level of income inequality is the driving force behind the disparate high school dropout rates.
Moreover, academic performance does not appear to affect the decision to drop out of high school for students from low-income families in states with greater income inequality. In states with lower levels of income inequality, 51 percent of high school dropouts cite poor academic performance as a primary reason for leaving school, the paper says. By contrast, only 21 percent of high school dropouts in states with high income inequality leave school because of poor academic performance.
“Although not conclusive, these survey data are broadly consistent with the notion that low-SES boys in more unequal states are more likely to drop out, not because they are struggling academically, but potentially because they perceive a lower return from staying in school,” the paper says. “To improve rates of upward mobility, we need to give economically disadvantaged youth reasons to believe that they can achieve economic success.”
Income Inequality, Social Mobility, and the Decision to Drop Out of High School is available at http://www.brookings.edu/~/media/projects/bpea/spring-2016/kearneylevine_incomeinequalityupwardmobility_conferencedraft.pdf.