Cleveland Fed studies: College degrees and wage premiums; gentrification trends in big cities

College degrees, while costly, provide labor market benefits, say Cleveland Fed researchers

While it has become more costly to attend college over the past 30 years, the extra education typically awards a benefit in the labor market, say Federal Reserve Bank of Cleveland researchers Daniel Carroll and Amy Higgins. For example, in 2010, the median household headed by a college graduate between 22 and 29 years of age had $42,693 of wage income while the median young non-college household had only $26,429 of wage income, a premium of 61.5 percent.

Looking at data samples over a longer time period -- from 1989 to 2010 -- the researchers say the wage income premium for young households headed by a college graduate averaged 45 percent, while the premium for households headed by older college graduates (30 to 65 years of age) averaged 88 percent.

What about households with some college, but no degree? The researchers say the wage income premium is virtually zero for young households in this education group and a small 22 percent at the median for older households.

Read A College Education Saddles Young Households with Debt, but Still Pays Off

Cleveland Fed researchers examine trends in neighborhood gentrification during and after the housing boom

During the housing boom, a number of large cities in the United States experienced redevelopment in their lower-income neighborhoods as higher-income residents moved in, a process known as gentrification. While some of those cities have seen continued gentrification since the recession, others have not, say Federal Reserve Bank of Cleveland researchers Daniel Kolliner and Daniel Hartley.

Kolliner and Hartley ranked the census tracks in a number of metropolitan areas by the average income of residents in the tracts. They found that for the cities with the largest gains in income (relative to their metropolitan areas), the growth was driven primarily by lower-income city neighborhoods moving up in the income distribution of the broader metro area. According to the researchers, such a pattern is consistent with gentrification.

From 2000 to 2007, Atlanta showed the largest increase in mean income ranking, say the researchers, while Washington was second; the biggest drops were in Tulsa and Omaha.

To examine whether the gentrification trends of the pre-recession boom period extended into the bust and recovery, the researchers compared changes in the mean income ranking from 2007 to 2010 against the changes in the mean income ranking from 2000 to 2007. They found that, for a few cities, such as Denver, Minneapolis, Portland, Seattle, and Washington, the increase in income ranking of center-city neighborhoods continued after the boom. However, the large increases in income ranking in the city of Atlanta during the boom years were not matched in the subsequent period. The researchers say this variation may be due to the fact that the financial crisis and housing bust had different effects on different industries, the concentration of which varies across regions.

Read Neighborhood Gentrification during the Boom and After

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892