Changing Roles of Parental Economic Resources in Children's Educational Attainment

Abstract

The authors investigated whether the relationship between parents' economic resources and children's educational attainment had changed over time by comparing two cohorts from the Panel Study of Income Dynamics. Using probit regressions and Chow tests, they examined multiple measures of economic resources, including income, net worth, liquid assets, and home ownership. Results show that the associations between parents' liquid assets and college attendance became significantly stronger among the latter cohort, suggesting the increasing importance of liquid assets. Of particular interest is a change in the role of negative liquid assets (unsecured debt exceeding savings) in high school graduation: Among the former cohort, there was no difference in likelihood of graduation between students from families with negative liquid assets and those from families with zero liquid assets, but among the latter cohort, the former were more likely graduate than the latter. Results demonstrate the importance of using diverse measures of economic resources in studying associations between parents' resources and children's educational attainment. KEY WORDS: assets and debt; cohort; education; income; inequality ********** Equal educational opportunity is considered a key indicator of a society's fairness. It is a deep-rooted belief in U.S. culture that every child should have an equal opportunity receive the best possible education. Educational opportunity is of particular importance social workers, whose mission is to enhance human well-being and help meet the basic human needs of all people, with particular attention the needs and empowerment of people who are vulnerable, oppressed, and living in (NASW, 2008, p. 1). Although it is generally recognized that education is a crucial path toward future well-being, it is not clear whether equal educational opportunity exists in the United States. The existing literature indicates that parents' economic resources are strong predictors of educational attainment: Children from high-income and wealthy families are likely achieve better educational outcomes than are economically disadvantaged children (Conley, 2001; Ellwood & Kane, 2000; Mare, 1981). Accordingly, measuring the association between parents' economic resources and children's educational attainment over time should provide a way gauge the United States' progress toward the ideal of equal educational opportunity. This study investigated changes in the role of parents' economic resources over time by comparing two cohorts of children from the Panel Study of Income Dynamics (PSID) data. Given that household wealth is not perfectly correlated with income (Wolff, 1990), we paid special attention parents' assets and used diverse measures of economic resources: income, net worth, liquid assets, and home ownership. BACKGROUND Recent decades have witnessed socioeconomic changes that may have affected educational opportunities. First, the cost of college education has risen rapidly, whereas financial aid has shifted more toward non-need-based aid (Kane, 2004). These changes are expected exacerbate the burden of low-income children in financing college education. Second, the value of a college education has increased continuously since the late 1970s, as reflected in growing earning gaps between workers with and without college degrees (Acemoglu, 2002). The increased value of education will heighten the impact of economic resources if parents with low resources are unable increase investment in their children's education. It is also plausible that it would motivate low-resource parents shift their resources toward children's education (Nam, 2004). Third, income and wealth inequalities have widened in the past few decades (Neckerman & Torche, 2007), and geographic concentration of wealth and poverty has intensified (Massey, 1996). Higher levels of income inequality may have contributed growing educational gaps, improving high-income children's educational outcomes while lowering those of low-income children (Mayer, 2001). …