The College Wage Premium vs the Marriage Wage Premium

She Did. He Did. They Are.

This is adapted from my article published by the Oklahoma Council of Public Affairs in their July Issue of the Perspective Magazine.

There is a lot of discussion in the mainstream media about the “college wage premium”—the benefit gained by earning a college diploma in terms of one’s long-term earning potential. Going to college provides many benefits to an employer, such as increased skills and a signal of work effort. In economic terms, college reshapes a person’s life by increasing his or her productivity, which higher productivity leads to higher earnings.

However, obtaining a college diploma is not the only life-altering event that can reshape a person’s life. Another major event is starting a family, which begins with marriage. After marriage, behavior often changes for the better, especially for men, as a person takes on the added responsibility of caring for a household. While harder to quantify, married people are more productive, as shown by higher earnings.

Unfortunately, the “marriage wage premium”—the earnings boost stemming from marriage—is not as widely discussed, or lauded, as the college wage premium.

We recently examined data from the U. S. Bureau of Labor Statistics (BLS) Current Population Survey as published in the October 2012 report, “Highlights of Women’s Earnings in 2012.” (PDF) The data in the two nearby tables show a significant boost in earnings from marriage. Indeed, for the majority of workers the boost exceeds that of going to college.

Table 1 shows the median weekly earnings of all workers in America in 2012. A person with a high school diploma earns $652 per week while a person with at least a bachelor’s degree earns $1,165 per week—a difference of 79 percent. The college premium is also higher for men than it is for women.

Table 1 also shows the median weekly earnings of people who have never been married at $609 per week while a married person earns $880 per week—a difference of 44 percent. The marriage premium is also higher for men than it is for women.

Table 1 Median Weekly Earnings by Characteristic

However, the majority of America’s employed work on an hourly basis (59 percent). These workers tend to be blue collar and thus middle class. For these workers, the situation is very different, as shown in Table 2.

A person with a high school degree earns $13.58 per hour while a person with at least a bachelor’s degree earns $18.18 per hour—a difference of 39 percent. The college premium is also higher for women than it is for men.

Table 2 also shows the median hourly earnings of people who have never been married at $10.16 per hour while a married person earns $14.99 per hour—a difference of 48 percent. The marriage premium is also higher for men than it is for women.

Table 2 Median Hourly Earnings by Characteristic

It is very interesting how the marriage premium, on a percentage basis, is actually higher for the majority of working Americans—yet marriage gets so little attention in the media. There is significant social and human capital formation that occurs within a marriage—interpersonal skills, dependability, reliability, integrity, flexibility, and motivation, to name just a few—that has tremendous economic value in the workplace (see the Energy Industry Competency Model).

To further illustrate the economic value of marriage, the data also show the impact on earnings from divorce. For both median weekly earnings and median hourly earnings, a person that has been through a divorce suffers a decline in economic productivity (-12 percent for weekly earnings and -5 percent for hourly earnings). In both cases, the negative impact is highest for men.

An important extension of this work would be to further disaggregate the data to better ensure an apples-to-apples comparison. The workers represented actually fall into each of these classifications in different proportions, thus biasing the results. (For instance, “never married” individuals likely represent a greater proportion of “high school graduates,” which makes it less clear which factor is driving the lower earnings.) Even so, these data from the BLS study are enlightening.

Many people lament the fading of the “American Dream” of living a solid middle-class lifestyle, but fail to connect the decline of the American Dream with dramatic increases in divorce and cohabitation. Both cases result in lower household earnings and erode the middle class. Society simply cannot discard the marriage earnings premium without expecting to pay a steep economic cost.

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Families, Not Government, Can Reduce Generational Poverty

Child

This is adapted from my article published by the Oklahoma Council of Public Affairs in their May Issue of the Perspective Magazine.

I have previously written about the mayor of a great city, a prize-winning economist, and an award-winning actor who all speak about the need for stable families.

In my previous post I discussed the inner-city woes of an “F” school in Tulsa and how the administration was attempting to deal with the behavioral problems the children brought with them to the classroom. Teachers and administrators commented that it was the unstable family life experienced by the children which was a primary factor driving the children’s undesirable behavior.

The mainstream notion about disadvantaged youth is that coming from a low-income family determines the effects on those disadvantaged children in adulthood. It is this notion that propels government anti-poverty policies. In a 2007 National Bureau of Economic Research working paper, economists Rajeev Dehejia, Thomas DeLeire, Erzo Luttmer, and Joshua Mitchell state (pdf):

“Many studies have documented the correlation between poverty and youth outcomes. Growing up in poverty is related to having worse physical health, lower levels of cognitive ability, lower levels of school achievement, and a greater level of emotional or behavioral problems.”

The authors also state that evidence shows that it is improbable that low income is the cause for all these adverse outcomes.

In addition to income, there is a significant amount of evidence that having an unmarried parent can help explain these effects. Economists Sara McLanahan and Gary Sandefur argue in their book “Growing up with a Single Parent” that:

“growing up with only one biological parent frequently deprives children of important economic, parental, and community resources, and these deprivations ultimately undermine their chances of future success.”

 

For instance, the highest percentage of single-headed households is among black mothers. In an interview with President Barack Obama, television host Bill O’Reilly stated that 72 percent of black babies are born out of wedlock. He asked the president why he and Mrs. Obama haven’t explicitly addressed this very serious problem.

According to federal health statistics, 24.6 percent of births to non-whites were to single mothers in 1964. (This includes blacks, Hispanics, and Asians—so the percentage of blacks was even lower than 24.6 percent.)

Fast forward to 2012, almost 50 years since LBJ’s War on Poverty began, and the percentage of births to unmarried black mothers was 72 percent. Despite 50 years of LBJ’s War on Poverty and $20 trillion spent, we are presented with one of the many perverse results of welfare policy. Clearly, the intent of welfare policy in 1964 was not to rip apart the structure of the American family.

In groundbreaking research in 1985, Harvard economist Richard Freeman (pdf) found that the background factors that most influence who escapes inner-city poverty are churchgoing, whether other members of the family work, and whether the family is on welfare.

In Oklahoma, 62 percent of children are born on Medicaid. The percentage nationwide ranges from a whopping 71 percent in Louisiana to a low of 27 percent in Virginia (with a median value of 45 percent). Unfortunately, Oklahoma is in the very high range, at fourth-highest in the country. In absolute numbers, that represents, on average, approximately 30,000 babies that are born into Oklahoma’s welfare system each and every year.

Unfortunately, as I recently pointed, this suggests Medicaid will continue to swell, as this next generation of newborns is very likely to be remain dependent on the program into adulthood like their parents. Economist Carolyn Moeling’s 2004 research (pdf) is a forewarning to those Oklahoma policymakers flirting with expanding public assistance:

“States that offered the most generous benefits to single mothers were the states that experienced the largest increases in single motherhood.”

Largely missing from mainstream conversation about what factors influence disadvantaged individuals’ ability to improve their financial trajectory is church going—despite robust evidence. Dehejia, et al.’s empirical results:

“show that religious organizations play an important role in shaping the lives of disadvantaged youth by mitigating at least some of the long-term consequences of disadvantage.”

More specifically, the results are strongest when disadvantage is measured by maternal education or youth’s level of education.

Similarly, Byron Johnson finds that church attendance has been found to influence youth’s inclination whether to commit serious crimes. In other words, when youth are actively involved in church, the linkage between neighborhood disorder and serious crime diminishes (where neighborhood or social disorder is characterized by visible cues like hanging out, drinking, taking drugs, and creating a sense of danger on the streets).

Research which confirms that welfare policy contributes to the ongoing existence of intergenerational poverty abounds—whereas factors like two-parent households and churchgoing have been shown to ameliorate intergenerational poverty. For liberal policymakers and media to argue that intact marriages and religion have negligible effects on the health of a community and an economy is to blatantly ignore the facts.

Family Intactness, Parental Participation, and Student Performance

Chart Showing Combined Average in English and Math by Family Structure

Combined Average in English and Math by Family Structure

This is from my article published by the Oklahoma Council of Public Affairs in their April Issue of the Perspective Magazine.

When President Obama was interviewed by Bill O’Reilly of FOX News, O’Reilly made the statement that poverty is driven by the dissolution of the American family. He specifically asked the president, “Why isn’t there a campaign by you and the First Lady to address this very explicitly?”

President Obama pushed back that he has indeed mentioned the importance of families in at least 10 speeches since becoming president. As a black, married man with children, the president has a tremendous opportunity to change the dialogue about our cultural ills. Instead of just lobbying for more spending for broadband Internet in schools or universal pre-K to help America’s children, the president should heed O’Reilly’s advice and advance a national dialogue about the importance of marriage.

According to a joint project between Princeton University and The Brookings Institution called Fragile Families, in 2006, 75 percent of black children were born to unmarried mothers. Black fathers are missing in action, and this absence is one of the greatest drivers of the failure of inner-city schools to effectively educate the children in poor neighborhoods. Bill Cosby and the Democratic mayor of Philadelphia, Michael Nutter, are among the successful black males that have publicly addressed the problem. Research by Robert Rector of the Heritage Foundation shows that if the inactive father becomes a participant in the household, 80 percent of those families in poverty would no longer be impoverished.

Children bring their personal struggles and frustrations to school with them. When you fill a room with angry, frustrated children, effective learning and comprehension are significantly impaired. Journalists at the Tulsa World recently wrote a series of articles addressing the challenges teachers and children face in one of Tulsa’s failing public schools. Oklahoma’s A-F grading system identified 36 schools in the district to receive an F in 2013, and this series of articles examined one of these failing schools: Hawthorne Elementary School.

Tulsa Public Schools has 36 “F” schools and 44 schools where more than 90 percent of students qualify for free or reduced-rate school meals. At Hawthorne Elementary, 94 percent of students qualify for these programs. According to one of the articles, “Teachers, low-wage support staff, and PTA members spend money out of their own pockets to buy warm coats, gloves, socks, underwear, and even toiletries for kids in need.”

Coupled with the poverty in this neighborhood is a high incidence of crime and violence. For the children at Hawthorne, this means that many of them have relatives who have been violently assaulted or killed. Many have parents that have been arrested and have been or currently are in jail. A pre-K teacher at Hawthorne said that in a reading of “The Three Little Pigs”—in which a pig died when the wolf ate him, and the wolf was caught and sent to jail—one child said, “My dad’s in jail for shooting someone.” Another student said, “My dad is dead.” Recently, faculty members recognized a man on Tulsa’s “Most Wanted” list as the father of one of their students.

According to Hawthorne’s principal, the most horrifying thing that she has dealt with is a fifth grade boy who was prostituting himself to men to bring extra money home for his family of 10 children that lives in a two-bedroom apartment. Hawthorne’s principal remarks about the boy’s family, “All of the kids in the family have special needs and serious behavior issues. Three of them were sent to foster homes or group homes because of behavior problems.”

Former Heritage Foundation scholar Patrick Fagan, now of the Family Research Council, testified last year in House Speaker T.W. Shannon’s interim study on “how to reform Oklahoma means-tested welfare programs so as to improve the health of the nuclear family.” In his testimony (Kansas pdf version), Fagan reported on household income, which is an important proxy for economic activity and human capital formation. Human capital formation is driven by the labor activity of the head of the household, and our future economic growth and human capital are determined by America’s children.

Dr. Fagan stated that, of those households with children, it is married intact households which have the highest median income. The lowest median income is in those households where marriage has never occurred.

With regard to the relationship between marriage and educational outcomes, children from intact families have higher GPAs in English and math (pdf), as you can see in the nearby chart.

Further, Dr. Fagan finds in his “Index of Family Belonging and Rejection” that family intactness is very influential on high school graduation rates. It influences high school graduation rates more than does the fraction of adult college graduates in an area. Further, he finds that family intactness and the fraction of adult high school graduates in an area have similar beneficial influences on prime-age male employment rates.

In the series of Tulsa World articles, teachers do stress that the significant lack of funds available for curriculum obviously impairs the children’s ability to succeed. However, their greatest challenge in trying to create a hospitable learning environment is the children’s behavior issues. The lack of concern and involvement from Hawthorne parents is overwhelming.

Hawthorne’s counselor recently visited the homes of parents of 15 students because they “weren’t responding to repeated phone calls over the course of three weeks about the possibility of their children having special education needs.” Chronic absenteeism is common, with many parents not even assuring their kids get to school.

According to one article, which mentions a fifth-grader who is student body president and two second-graders with perfect attendance who were recently named to the honor roll, “The active PTA members’ children are proof positive that kids can not only succeed but can flourish academically, even in an F school.”

School faculty’s focus on incorporating children’s family into the curriculum on a regular basis is crucial to marked academic improvement. Hawthorne held its first Donut with Dads event and had 120 dads attend. In its first-ever honor roll assembly, teachers were elated at the 100-plus in attendance. Given that the school hadn’t engaged parents before this to publicly share in the success of their children is disappointing, but the fact that the faculty recognizes the importance of this involvement is the first step toward improvement.

Increases in per pupil spending will never affect the academic outcomes of students like the encouragement and active participation of their parents in their learning. Hawthorne’s new principal seems to recognize the importance of engaging parents. We can only hope that her colleagues in the 35 other “F” schools take notice and phone her for advice.