Janet L Yellen: Perspectives on inequality and opportunity from the
Survey of Consumer Finances
Speech by Ms Janet L Yellen, Chair of the Board of Governors of the Federal Reserve
System, at the Conference on Economic Opportunity and Inequality, Federal Reserve Bank
of Boston, Boston, Massachusetts, 17 October 2014.
* * *
Accompanying graphs can be found at the end of the speech.
The distribution of income and wealth in the United States has been widening more or less
steadily for several decades, to a greater extent than in most advanced countries.1 This trend
paused during the Great Recession because of larger wealth losses for those at the top of
the distribution and because increased safety-net spending helped offset some income
losses for those below the top. But widening inequality resumed in the recovery, as the stock
market rebounded, wage growth and the healing of the labor market have been slow, and the
increase in home prices has not fully restored the housing wealth lost by the large majority of
households for which it is their primary asset.
The extent of and continuing increase in inequality in the United States greatly concern me.
The past several decades have seen the most sustained rise in inequality since the
19th century after more than 40 years of narrowing inequality following the Great Depression.
By some estimates, income and wealth inequality are near their highest levels in the past
hundred years, much higher than the average during that time span and probably higher than
for much of American history before then.2 It is no secret that the past few decades of
widening inequality can be summed up as significant income and wealth gains for those at
the very top and stagnant living standards for the majority. I think it is appropriate to ask
whether this trend is compatible with values rooted in our nation's history, among them the
high value Americans have traditionally placed on equality of opportunity.
Some degree of inequality in income and wealth, of course, would occur even with
completely equal opportunity because variations in effort, skill, and luck will produce
variations in outcomes. Indeed, some variation in outcomes arguably contributes to
economic growth because it creates incentives to work hard, get an education, save, invest,
and undertake risk. However, to the extent that opportunity itself is enhanced by access to
economic resources, inequality of outcomes can exacerbate inequality of opportunity,
thereby perpetuating a trend of increasing inequality. Such a link is suggested by the "Great
Gatsby Curve," the finding that, among advanced economies, greater income inequality is
associated with diminished intergenerational mobility.3 In such circumstances, society faces
difficult questions of how best to fairly and justly promote equal opportunity. My purpose
today is not to provide answers to these contentious questions, but rather to provide a factual
1
See Salvatore Morelli, Timothy Smeeding, and Jeffrey Thompson (2014), "Post-1970 Trends in Within-
Country Inequality and Poverty: Rich and Middle Income Countries (PDF)," IRP Discussion Paper Series
1419-14 (Madison, Wis.: Institute for Research on Poverty, March).
2
For income inequality in the past 100 years, see Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez
(2011), "Top Incomes in the Long Run of History (PDF)," Journal of Economic Literature, vol. 49 (March),
pp.3-71. For wealth inequality, see Emmanuel Saez and Gabriel Zucman (2014), "Wealth Inequality in the
United States since 1913: Evidence from Capitalized Income Tax Data," working paper and slides (October,
14, 2014). For income inequality before 1913, see Peter H. Lindert and Jeffrey G. Williamson (2012),
"American Incomes 1774-1860," NBER Working Paper Series 18396 (Cambridge, Mass.: National Bureau of
Economic Research, September).
3
See Alan B. Krueger (2012), "The Rise and Consequences of Inequality in the United States (PDF)," speech
delivered at the Center for American Progress, Washington, January 12.
basis for further discussion. I am pleased that this conference will focus on equality of
economic opportunity and on ways to better promote it.
In my remarks, I will review trends in income and wealth inequality over the past several
decades, then identify and discuss four sources of economic opportunity in America - think
of them as "building blocks" for the gains in income and wealth that most Americans hope
are within reach of those who strive for them. The first two are widely recognized as
important sources of opportunity: resources available for children and affordable higher
education. The second two may come as more of a surprise: business ownership and
inheritances. Like most sources of wealth, family ownership of businesses and inheritances
are concentrated among households at the top of the distribution. But both of these are less
concentrated and more broadly distributed than other forms of wealth, and there is some
basis for thinking that they may also play a role in providing economic opportunities to a
considerable number of families below the top.
In focusing on these four building blocks, I do not mean to suggest that they account for all
economic opportunity, but I do believe they are all significant sources of opportunity for
individuals and their families to improve their economic circumstances.
Income and wealth inequality in the Survey of Consumer Finances
I will start with the basics about widening inequality, drawing heavily on a trove of data
generated by the Federal Reserve's triennial Survey of Consumer Finances (SCF), the latest
of which was conducted in 2013 and published last month.4 The SCF is broadly consistent
with other data that show widening wealth and income inequality over the past several
decades, but I am employing the SCF because it offers the added advantage of specific
detail on income, wealth, and debt for each of 6,000 households surveyed.5 This detail from
family balance sheets provides a glimpse of the relative access to the four sources of
opportunity I will discuss.
While the recent trend of widening income and wealth inequality is clear, the implications for
a particular family partly depend on whether that family's living standards are rising or not as
its relative position changes. There have been some times of relative prosperity when
income has grown for most households but inequality widened because the gains were
proportionally larger for those at the top; widening inequality might not be as great a concern
if living standards improve for most families. That was the case for much of the 1990s, when
real incomes were rising for most households. At other times, however, inequality has
widened because income and wealth grew for those at the top and stagnated or fell for
others. And at still other times, inequality has widened when incomes were falling for most
households, but the declines toward the bottom were proportionally larger. Unfortunately, the
past several decades of widening inequality has often involved stagnant or falling living
standards for many families.
Since the survey began in its current form in 1989, the SCF has shown a rise in the
concentration of income in the top few percent of households, as shown in figure 1.6 By
definition, of course, the share of all income held by the rest, the vast majority of households,
has fallen by the same amount.7 This concentration was the result of income and living
standards rising much more quickly for those at the top. After adjusting for inflation, the
average income of the top 5 percent of households grew by 38 percent from 1989 to 2013,
as we can see in figure 2. By comparison, the average real income of the other 95 percent of
households grew less than 10 percent. Income inequality narrowed slightly during the Great
Recession, as income fell more for the top than for others, but resumed widening in the
recovery, and by 2013 it had nearly returned to the pre-recession peak.8
The distribution of wealth is even more unequal than that of income, and the SCF shows that
wealth inequality has increased more than income inequality since 1989. As shown in
figure 3, the wealthiest 5 percent of American households held 54 percent of all wealth
reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent
in 2013. By contrast, the rest of those in the top half of the wealth distribution - families that
in 2013 had a net worth between $81,000 and $1.9 million - held 43 percent of wealth in
1989 and only 36 percent in 2013.
The lower half of households by wealth held just 3 percent of wealth in 1989 and only
1 percent in 2013. To put that in perspective, figure 4 shows that the average net worth of the
lower half of the distribution, representing 62 million households, was $11,000 in 2013.9
About one-fourth of these families reported zero wealth or negative net worth, and a
significant fraction of those said they were "underwater" on their home mortgages, owing
more than the value of the home.10 This $11,000 average is 50 percent lower than the
average wealth of the lower half of families in 1989, adjusted for inflation. Average real
wealth rose gradually for these families for most of those years, then dropped sharply after
2007. Figure 5 shows that average wealth also grew steadily for the "next 45" percent of
households before the crisis but didn't fall nearly as much afterward. Those next
45 households saw their wealth, measured in 2013 dollars, grow from an average of
$323,000 in 1989 to $516,000 in 2007 and then fall to $424,000 in 2013, a net gain of about
one-third over 24 years. Meanwhile, the average real wealth of families in the top 5 percent
has nearly doubled, on net - from $3.6 million in 1989 to $6.8 million in 2013.
Housing wealth - the net equity held by households, consisting of the value of their homes
minus their mortgage debt - is the most important source of wealth for all but those at the
very top.11 It accounted for three-fifths of wealth in 2013 for the lower half of families and
twofifths of wealth for the next 45. But housing wealth was only one-fifth of total wealth for the
share for this group fell in the financial crisis, to 34 percent in 2010, then rose in the recovery, regaining a
37 percent share in 2013.
7
The top half of the distribution, except for the top 5 percent, earned 53 percent of all income in 1989 but only
51 percent in 2010. In 2013, households in the "next 45 percent" had incomes between $47,000 and
$230,000. While income has rebounded for the top 5 percent in the recovery, the share that went to the next
45 percent declined further to 49 percent in 2013. The bottom half of the distribution saw their share of income
fall from 16 percent in 1989 to 15 percent in 2007, edge up in 2010, and then reach a new low for the survey
last year at 14 percent.
8
Largely because of losses in income from financial holdings, the share of total income received by the top
5 percent of households fell 3 percentage points from 2007 to 2010, with the next 45 percent and lower half of
households each gaining about half of that share. Some of the nominal income losses for households below
the top 5 percent were offset by larger-than-normal transfer payments during the recession.
9
All SCF income and wealth data prior to the 2013 survey are adjusted for inflation by expressing the values in
2013 dollars.
10
In the 2013 SCF, 17 percent of all families reporting zero or negative net worth also reported they were
underwater on their home mortgages.
11
Housing wealth includes the net equity in primary residences and other residential real estate.
top 5 percent of families. The share of housing in total net worth for all three groups has not
changed much since 1989.
Since housing accounts for a larger share of wealth for those in the bottom half of the wealth
distribution, their overall wealth is affected more by changes in home prices. Furthermore,
homeowners in the bottom half have been more highly leveraged on their homes, amplifying
this difference. As a result, while the SCF shows that all three groups saw proportionally
similar increases and subsequent declines in home prices from 1989 to 2013, the effects on
net worth were greater for those in the bottom half of households by wealth. Foreclosures
and the dramatic fall in house prices affected many of these families severely, pushing them
well down the wealth distribution. Figure 6 shows that homeowners in the bottom half of
households by wealth reported 61 percent less home equity in 2013 than in 2007. The next
45 reported a 29 percent loss of housing wealth, and the top 5 lost 20 percent.
Fortunately, rebounding housing prices in 2013 and 2014 have restored a good deal of the
loss in housing wealth, with the largest gains for those toward the bottom. Based on rising
home prices alone and not counting possible changes in mortgage debt or other factors,
Federal Reserve staff estimate that between 2013 and mid-2014, average home equity rose
49 percent for the lowest half of families by wealth that own homes.12 The estimated gains
are somewhat less for those with greater wealth.13 Homeowners in the bottom 50, which had
an average overall net worth of $25,000 in 2013, would have seen their net worth increase to
an average of $33,000 due solely to home price gains since 2013, a 32 percent increase.
Another major source of wealth for many families is financial assets, including stocks, bonds,
mutual funds, and private pensions.14 Figure 7 shows that the wealthiest 5 percent of
households held nearly two-thirds of all such assets in 2013, the next 45 percent of families
held about one-third, and the bottom half of households, just 2 percent. This figure may look
familiar, since the distribution of financial wealth has concentrated at the top since 1989 at
rates similar to those for overall wealth, which we saw in figure 3.15
Those are the basics on wealth and income inequality from the SCF. Other research tells us
that inequality tends to persist from one generation to the next. For example, one study that
divides households by income found that 4 in 10 children raised in families in the
lowestincome fifth of households remain in that quintile as adults.16 Fewer than 1 in 10 children of
families at the bottom later reach the top quintile. The story is flipped for children raised in the
highest-income households: When they grow up, 4 in 10 stay at the top and fewer than 1 in
10 fall to the bottom.
Research also indicates that economic mobility in the United States has not changed much
in the last several decades; that mobility is lower in the United States than in most other
12
The house price data used are from CoreLogic, and data track price changes at the Core Based Statistical
Area level between the survey month in 2013 and June 2014. The average increase in home prices over this
period was 8 percent. No adjustments are made to account for possible changes in mortgage leverage.
13
Home price gains in 2013 and 2014 are estimated to have raised the home equity of home-owning
households in the next 45 percent of households in the wealth distribution by 12 percent, and by 9 percent for
home-owning households in the top 5 percent of the wealth distribution.
14
The SCF defines financial assets as liquid assets, certificates of deposit, directly held pooled investment
funds, stocks, bonds, quasi-liquid assets (including retirement accounts), savings bonds, whole life insurance,
other managed assets, and other financial assets.
15
In 1989, the top 5 percent of households held 54 percent of financial assets, the next 45 percent (that is,
home-owning households in the 50th through 95th percentiles of the wealth distribution) held 42 percent, and
the bottom half held 4 percent.
16
See Pew Charitable Trusts (2012), Pursuing the American Dream: Economic Mobility across Generations
(PDF) (Washington: PCT, July).
advanced countries; and, as I noted earlier, that economic mobility and income inequality
among advanced countries are negatively correlated.17
Four building blocks of opportunity
An important factor influencing intergenerational mobility and trends in inequality over time is
economic opportunity. While we can measure overall mobility and inequality, summarizing
opportunity is harder, which is why I intend to focus on some important sources of
opportunity - the four building blocks I mentioned earlier.
Two of those are so significant that you might call them "cornerstones" of opportunity, and
you will not be surprised to hear that both are largely related to education. The first of these
cornerstones I would describe more fully as "resources available to children in their most
formative years." The second is higher education that students and their families can afford.
Two additional sources of opportunity are evident in the SCF. They affect fewer families than
the two cornerstones I have just identified, but enough families and to a sufficient extent that
I believe they are also important sources of economic opportunity.
The third building block of opportunity, as shown by the SCF, is ownership of a private
business.18 This usually means ownership and sometimes direct management of a family
business. The fourth source of opportunity is inherited wealth. As one would expect,
inheritances are concentrated among the wealthiest families, but the SCF indicates they may
also play an important role in the opportunities available to others.
Resources available for children
For households with children, family resources can pay for things that research shows
enhance future earnings and other economic outcomes - homes in safer neighborhoods with
good schools, for example, better nutrition and health care, early childhood education,
intervention for learning disabilities, travel and other potentially enriching experiences.19
Affluent families have significant resources for things that give children economic advantages
as adults, and the SCF data I have cited indicate that many other households have very little
to spare for this purpose. These disparities extend to other household characteristics
associated with better economic outcomes for offspring, such as homeownership rates,
educational attainment of parents, and a stable family structure.20
17
See Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel Saez, and Nicholas Turner (2014), "Is the
United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility," NBER Working Paper
Series 19844 (Cambridge, Mass.: National Bureau of Economic Research, January (revised May 2014)).
See also Organisation for Economic Co-operation and Development (2010), "A Family Affair:
Intergenerational Social Mobility across OECD Countries (PDF)," in Economic Policy Reforms: Going for
Growth 2010, pp.183-200 (Paris: OECD); and Alan B. Krueger (2012), "The Rise and Consequences of
Inequality in the United States (PDF)," speech delivered at the Center for American Progress, Washington,
January 12.
18
Business assets in the SCF include both actively and "non-actively" managed businesses but do not include
ownership of publicly traded stock.
19
See, for example, Janet Currie and Douglas Almond (2011), "Human Capital Development before Age Five,"
ch. 15 in David Card and Orley Ashenfelter, eds., Handbook of Labor Economics, vol. 4 (Holland: Elsevier),
pp. 1315-1486.
20
Homeownership by parents is strongly associated with economic success for children; see Thomas P. Boehm
and Alan M. Schlottmann (1999), "Does Home Ownership by Parents Have an Economic Impact on Their
Children?" Journal of Housing Economics, vol. 8 (September), pp. 217-32. Ninety-seven percent of
topearning families with children own a home, compared with fewer than half of the bottom 50 percent of families
with children; educational attainment of parents is strongly predictive of outcomes for children that determine
earnings. See Ayana Douglas-Hall and Michelle Chau (2007), "Parents' Low Education Leads to Low Income,
Despite Full-Time Employment" (New York: National Center for Children in Poverty, Columbia University,
According to the SCF, the gap in wealth between families with children at the bottom and the
top of the distribution has been growing steadily over the past 24 years, but that pace has
accelerated recently. Figure 8 shows that the median wealth for families with children in the
lower half of the wealth distribution fell from $13,000 in 2007 to $8,000 in 2013, after
adjusting for inflation, a loss of 40 percent.21 These wealth levels look small alongside the
much higher wealth of the next 45 percent of households with children. But these families
also saw their median wealth fall dramatically - by one-third in real terms - from $344,000 in
2007 to $229,000 in 2013. The top 5 percent of families with children saw their median
wealth fall only 9 percent, from $3.5 million in 2007 to $3.2 million in 2013, after inflation.
For families below the top, public funding plays an important role in providing resources to
children that influence future levels of income and wealth. Such funding has the potential to
help equalize these resources and the opportunities they confer.
Social safety-net spending is an important form of public funding that helps offset disparities
in family resources for children. Spending for income security programs since 1989 and until
recently was fairly stable, ranging between 1.2 and 1.7 percent of gross domestic product
(GDP), with higher levels in this range related to recessions. However, such spending rose to
2.4 percent of GDP in 2009 and 3 percent in 2010.22 Researchers estimate that the increase
in the poverty rate because of the recession would have been much larger without the effects
of income security programs.23
Public funding of education is another way that governments can help offset the advantages
some households have in resources available for children. One of the most consequential
examples is early childhood education. Research shows that children from lower-income
households who get good-quality pre-Kindergarten education are more likely to graduate
from high school and attend college as well as hold a job and have higher earnings, and they
are less likely to be incarcerated or receive public assistance.24 Figure 9 shows that access
to quality early childhood education has improved since the 1990s, but it remains limited -
41 percent of children were enrolled in state or federally supported programs in 2013. Gains
in enrollment have stalled since 2010, as has growth in funding, in both cases because of
budget cuts related to the Great Recession. These cuts have reduced per-pupil spending in
state-funded programs by 12 percent after inflation, and access to such programs, most of
which are limited to lower-income families, varies considerably from state to state and within
November). A considerable body of literature establishes the correlation between educational attainment of
parents and their children. Other research has identified that this relationship is causal; see, for example,
Philip Oreopoulos, Marianne E. Page, and Ann Huff Stevens (2006), "The Intergenerational Effects of
Compulsory Schooling," Journal of Labor Economics, vol. 24 (October), pp. 729-60. Eighty-six percent of
topearning households in the SCF with children are headed by a college graduate, compared with 12 percent in
the bottom half of households with children; children raised by a single parent earn less as adults. See Mary
Ann Powell and Toby L. Parcel (1997), "Effects of Family Structure on the Earnings Attainment Process:
Differences by Gender," Journal of Marriage and Family, vol. 59 (May), pp. 419-33. Only 4 percent of
topearning households with children are headed by unmarried parents, compared with 47 percent for the lower
half of households with children.
21
Distributional statistics for families with children are based on a sorting of only families with children.
22
Congressional Budget Office historic budget data. Income security programs include UI, SSI, SNAP EITC, and
other family support and nutrition programs.
23
See Jeffrey P. Thompson and Timothy M. Smeeding (2013), "Inequality and Poverty in the United States: The
Aftermath of the Great Recession (PDF)," Finance and Economics Discussion Series 2013-51 (Washington:
Board of Governors of the Federal Reserve System, July).
24
See James J. Heckman, Seong Hyeok Moon, Rodrigo Pinto, Peter A. Savelyev, and Adam Yavitz (2010),
"The Rate of Return to the HighScope Perry Preschool Program," Journal of Public Economics, vol. 94 (1-2),
pp. 114-28; and Clive R. Belfield, Milagros Nores, Steve Barnett, and Lawrence Schweinhart (2006), "The
High/Scope Perry Preschool Program: Cost-Benefit Analysis Using Data from the Age-40 Followup," Journal
of Human Resources, vol. 41 (Winter), pp. 162-90.
states, since local funding is often important.25 In 2010, the United States ranked 28th out of
38 advanced countries in the share of four-year-olds enrolled in public or private early
childhood education.26
Similarly, the quality and the funding levels of public education at the primary and secondary
levels vary widely, and this unevenness limits public education's equalizing effect. The
United States is one of the few advanced economies in which public education spending is
often lower for students in lower-income households than for students in higher-income
households.27 Some countries strive for more or less equal funding, and others actually
require higher funding in schools serving students from lower-income families, expressly for
the purpose of reducing inequality in resources for children.
A major reason the United States is different is that we are one of the few advanced nations
that funds primary and secondary public education mainly through subnational taxation. Half
of U.S. public school funding comes from local property taxes, a much higher share than in
other advanced countries, and thus the inequalities in housing wealth and income I have
described enhance the ability of more-affluent school districts to spend more on public
schools. Some states have acted to equalize spending to some extent in recent years, but
there is still significant variation among and within states. Even after adjusting for regional
differences in costs and student needs, there is wide variation in public school funding in the
United States.28
Spending is not the only determinant of outcomes in public education. Research shows that
higher-quality teachers raise the educational attainment and the future earnings of
students.29 Better-quality teachers can help equalize some of the disadvantages in
opportunity faced by students from lower-income households, but here, too, there are forces
that work against raising teacher quality for these students. Research shows that, for a
variety of reasons, including inequality in teacher pay, the best teachers tend to migrate to
and concentrate in schools in higher-income areas.30 Even within districts and in individual
schools, where teacher pay is often uniform based on experience, factors beyond pay tend to
25
The share of four-year-olds in state-funded pre-K programs increased from 14 percent in 2002 to 27 percent in
2010 but has been 28 percent since. Head Start enrollments have been fairly steady since 2005. Forty-one
percent of four-year-olds were enrolled in federally funded Head Start or state-funded pre-K education
programs in 2013. See National Institute for Early Education Research (2013), The State of Preschool 2013:
State Preschool Yearbook (PDF) (New Brunswick, N.J.: Rutgers Graduate School of Education). For analysis
of Head Start enrollment by age, see the Annie E. Casey Foundation KIDS COUNT Data Center.
26
See Organisation for Economic Co-operation and Development (2013), "How Do Early Childhood Education
and Care (ECEC) Policies, Systems and Quality Vary across OECD Countries? (PDF)" Education Indicators in
Focus Series 11 (Paris: OECD, February).
27
See Organisation for Economic Co-operation and Development (2013), Education at a Glance 2013: OECD
Indicators (PDF) (Paris: OECD).
28
See Education Week (2014), Quality Counts 2014: District Disruption and Revival (Bethesda, Md.: Editorial
Projects in Education, January).
29
See Eric A. Hanushek (2011), "The Economic Value of Higher Teacher Quality," Economics of Education
Review, vol. 30 (June), pp. 466-79; or, for estimates of the future earnings students gain by having a better
teacher, see Raj Chetty, John N. Friedman, and Jonah E. Rockoff, "The Long-Term Impacts of Teachers:
Teacher Value-Added and Student Outcomes in Adulthood," unpublished paper, Harvard University.
30
See Eric Isenberg, Jeffrey Max, Philip Gleason, Liz Potamites, Robert Santillano, Heinrich Hock, and Michael
Hansen (2013), Access to Effective Teaching for Disadvantaged Students (PDF), report NCEE 2014-4001,
prepared for the Institute of Education Sciences (Washington: U.S. Department of Education, Institute of
Education Sciences, National Center for Education Evaluation and Regional Assistance); and Kati Haycock
and Eric A. Hanushek (2010), "An Effective Teacher in Every Classroom: A Lofty Goal, But How to Do It?
(PDF)" Education Next, vol. 10 (Summer), pp. 46-52.
lead more experienced and better-performing teachers to migrate to schools and to
classrooms with more-advantaged students.31
Higher education that families can afford
For many individuals and families, higher education is the other cornerstone of economic
opportunity. The premium in lifetime earnings because of higher education has increased
over the past few decades, reflecting greater demand for college-educated workers. By one
measure, the median annual earnings of full-time workers with a four-year bachelor's degree
are 79 percent higher than the median for those with only a high school diploma.32 The wage
premium for a graduate degree is significantly higher than the premium for a college degree.
Despite escalating costs for college, the net returns for a degree are high enough that
college still offers a considerable economic opportunity to most people.33
Along with other data, the SCF shows that most students and their families are having a
harder time affording college. College costs have risen much faster than income for the large
majority of households since 2001 and have become especially burdensome for households
in the bottom half of the earnings distribution.
Rising college costs, the greater numbers of students pursuing higher education, and the
recent trends in income and wealth have led to a dramatic increase in student loan debt.
Outstanding student loan debt quadrupled from $260 billion in 2004 to $1.1 trillion this year.
Sorting families by wealth, the SCF shows that the relative burden of education debt has long
been higher for families with lower net worth, and that this disparity has grown much wider in
the past couple decades. Figure 10 shows that from 1995 to 2013, outstanding education
debt grew from 26 percent of average yearly income for the lower half of households to
58 percent of income.34 The education debt burden was lower and grew a little less sharply
for the next 45 percent of families and was much lower and grew not at all for the top
5 percent.35
Higher education has been and remains a potent source of economic opportunity in America,
but I fear the large and growing burden of paying for it may make it harder for many young
people to take advantage of the opportunity higher education offers.
31
Better and more-experienced teachers tend to move to better-resourced schools, including those with more
active outside funding, or those with more-advantaged students, such as magnet schools. Even within
schools, more experienced and higher performing teachers are more likely to teach Advanced Placement
classes which tend to serve more advantaged students. The result is that lower income and lower achieving
students are more likely to be taught by less experienced and lower performing teachers. See Charles
Clotfelter, Helen Ladd, Jacob Vigdor, and Justin Wheeler (2007), "High Poverty Schools and the Distribution of
Teachers and Principals," North Carolina Law Review, vol. 85 (2), pp. 1345-79; Charles Clotfelter, Helen
Ladd, and Jacob Vigdor (2005), "Who Teaches Whom? Race and the Distribution of Novice Teachers,"
Economics of Education Review, vol. 24 (August), pp. 377-92; and Hamilton Lankford, Susanna Loeb, and
James Wyckoff (2002), "Teacher Sorting and the Plight of Urban Schools: A Descriptive Analysis," Education
Evaluation and Policy Analysis, vol. 37 (Spring), pp. 37-62.
32
See Sandy Baum (2014), Higher Education Earnings Premium: Value