Not to sound like your old guidance counselor, but one of the biggest economic decisions any American will make is whether to drop out of high school. Dropping out is usually a ticket to a lifetime of low earnings; graduating, and especially pursuing college or vocational training, is the best path to economic mobility. Stats don't lie: the median income for a man who didn't finish high school in 2014 was one-third lower than it was for those who simply graduated, according to the Census Bureau.
If you want more economic mobility in America, as almost every candidate for public office today professes to, you should be worried about anything that raises the odds of low-income students quitting school.
Which means, according to new research from economists at the University of Maryland and Wellesley College, you should be worried about income inequality. Not the 1 percent/99 percent kind of inequality, but, instead, the gap between the very poor and the middle class.
In areas where that gap is larger, economists Melissa Kearney and Phillip Levine report in a paper released Thursday at the Brookings Papers on Economic Activity, the dropout rate is higher for low-income students. That's true even when you control for a variety of other factors, such as per-student education spending, the share of single parents in the community and levels of racial or income segregation. In a separate but related finding, the economists discovered that young people are more likely to drop out in communities where the economic returns to a high-school diploma are relatively low.
The effect, Kearney and Levine said, is entirely driven by young men. It creates a vicious cycle of inequality: Boys who grow up poor, in areas where inequality is greater, are more prone to making a bad teenage decision that will dampen their earnings for life.
Kearney theorized that boys who grow up poor in areas where there's not much of a middle class in sight are less likely to imagine themselves ascending to a middle-class lifestyle themselves. “Instead of an aspiration effect,” she said in an interview, “income inequality could lead to a desperation effect for poor kids.”
The findings suggest that conservatives, in particular, are wrong to dismiss inequality as unimportant when compared with poverty — the former appears to exacerbate the latter. (“Being poor is bad,” Kearney said. “It’s even worse if you’re in a more unequal place. We didn’t know that was going to be true.”)
They also suggested, at least when it comes to improving economic mobility, that liberals are wrong to focus on the gap between the very rich and everyone else, as opposed to the one between the poor and the middle.
The gap between the poor and the middle has widened slightly in recent years, but not by nearly as much as the gap between the 1 percent and the rest of the country. Over the past few decades, actually, the poor-middle divide has stayed relatively stable. That, Levine and Kearney suggested, could be a clue to another economic mystery: why new research shows that levels of mobility haven't budged in the post-war era.