The “college wage premium” is typically defined as the difference between average wages earned by workers with a four-year degree versus those earned by workers with a high school diploma. For decades, the premium for degree completers has been substantial, and remains so today. However, research shows the gap has recently plateaued and a new working paper tries to pinpoint the causes.
Researchers Zachary Bleemer and Sarah Quincy (from Princeton and Vanderbilt, respectively) start by confirming the existence and trends of the college wage premium using data going all the way back to 1900. Sources include the U.S. Census, military test score records, and a raft of longitudinal surveys from the U.S. Bureau of Labor Statistics. College data come from IPEDS, College Scorecard, and previous research. While their findings confirm generally positive wage returns for college completion over the last century, not all students benefit equally. They determine that the college wage premium received by lower-income Americans completing degrees has halved since 1960, a troubling trend they call “regressivity.”
Their analysis largely rules out student readiness as a major factor, showing that the rich-poor test-score gap within the college-going population has been roughly flat (about 10 percentage points) since 1965. They conclude that ability-based selection is unlikely to explain this regressivity to any great degree. Instead, Bleemer and Quincy zero in on three factors that they say combine to explain 80 percent of the observed regressivity.
First, the institutions where lower-income students are concentrated—what they call “teaching-oriented public universities”—have declined in funding, student retention, and economic value for graduates since 1960, relative to research-oriented public institutions.
Second, lower-income students have been disproportionately enrolling in community and for-profit colleges since 1980 and 1990, respectively, rather than in higher-value four-year non-profit institutions. The main problem with increased community college enrollment for lower-income students (the gap between bottom- and top-tercile student enrollments has been 20 percentage points for decades) is that capable students shun higher-value four-year institutions to their detriment, while the poor outcomes of for-profit college students—including a sky-high dropout rate and post-graduation earnings that are often lower than individuals with only a high school diploma—are well documented.
Third is the difference in major choices among higher- and lower-income students. Students from the bottom parental income tercile declared majors of similar value to their top-tercile peers in the 1980s and 1990s, but they are today declaring majors that annually pay about 4 percentage points less, including those in the humanities.
What does all this mean? Bleemer and Quincy are not overly pessimistic in their assessment, saying that regressivity is likely “not a permanent feature” of postsecondary education, given the “wide range of policy changes affecting both college supply and demand” in recent years. They note the contraction of community college enrollment since its peak in 2012, the phase-in and phase-out of race-based affirmative action, the boom-and-bust cycle of for-profit colleges (although they could boom again), and ongoing changes in federally-subsidized financial aid programs. The authors recommend additional research to “disentangle the importance of each policy to the various channels that have generated regressivity” over time.
However, while the paper’s findings might indicate a putative end to regressivity, they aren’t necessarily good news for the college wage premium generally. Any number of other connected factors could serve to render college degrees less valuable in the future—an end to the historic signaling function of college degrees among employers, the impacts of K-12 grade inflation on true college readiness versus readiness “on-paper,” and the receding of the old “college for all” mentality. To solve both problems, perhaps we should encourage community colleges to return to their previous incarnation as tech schools, and make sure that students of all socioeconomic statuses who want a traditional college experience go to the four-year schools that are good at providing high-value degrees.
SOURCE: Zachary Bleemer and Sarah Quincy, “Changes in the College Mobility Pipeline Since 1900,” NBER Working Papers (May 2025).
