- Published Date: March 2015

Contrary to conventional wisdom, the US income-achievement gap – the difference in educational success between the children of rich and poor Americans – is not widening. That is the conclusion of a new study by economist Eric Nielsen to be presented at the Royal Economic Society’s 2015 annual conference. He claims that while economic inequality in the United States continues to rise, schools are still acting as the great equaliser they were designed to be.

The research re-examines historical data on educational performance and concludes that the income-achievement gap narrowed significantly in the United States between 1980 and 1997, and that this decrease translates to a substantial decrease in adult outcome inequality. In particular, he estimates that the narrowing of the income-achievement gap corresponds to a narrowing of the adult wealth gap by $60,000-$100,000 in present-value dollars and a narrowing of the college completion gap.

But these results do not imply that the adult outcome gap between high- and low-income youth has actually narrowed. Rather, they imply that the gap in outcomes would be even larger had the income-achievement gap not decreased.

Prior research, which found that the income-achievement gap was widening, used two ‘untenable assumptions’, according to the new study: the consistency over time of the scale of test scores; and the equivalence of similar score increases at the low and high end of achievement.

While previous research found that the achievement-income gap had widened by 40%, triggering concerns that youth from low-income households may have an increasingly hard time competing academically, the new results suggest that this finding was entirely due to bias resulting from the flawed methodology.

The new study uses ordinal data, taking ranking among students as the indicator of educational achievement, and selected data for which different eras could be placed on an equivalent scale.

The author cautions that while his results send an encouraging message about the continuing role of education in reducing outcome inequality, it does not alter the fact that inequality continues to rise. Nevertheless, he recommends re-examining the data on the income-achievement gap:

‘My study shows that the method used to assess achievement differences matters a lot in an important, applied setting.

‘Future work should investigate whether other ‘standard’ conclusions about achievement inequality are driven by untenable assumptions on achievement test scores.’

More…

Income inequality in the United States has increased dramatically in recent decades. Moreover, the difference in childhood investments made by high- and low-income parents has also increased very rapidly. These trends have generated concern that youth from low-income households may have an increasingly hard time competing academically.

Indeed, prior research has found that the income-achievement gap increased dramatically over the last several decades in the United States. For example, one paper estimates that the difference in achievement between students in the bottom 10% of households ranked by income and students in the top 10% increased by 40% between 1970 and 2000.

This study uses more robust and believable statistical methods than are standard in education economics to overturn this worrying conclusion. The author finds that the income-achievement gap narrowed significantly in the United States between 1980 and 1997 and that this decrease translates to a substantial decrease in adult outcome inequality.

In particular, he estimates that the narrowing of the income-achievement gap corresponds to a narrowing of the adult wealth gap by $60,000-$100,000 in present-value dollars and a narrowing of the college completion gap of 0.07. The results do not imply that the adult outcome gap between high- and low-income youth has actually narrowed. Rather, they imply that the gap in outcomes would be even larger had the income-achievement gap not decreased.

These findings disagree with prior research because the author employs different, more robust statistical methods to measure achievement differences using test scores. Economists and policy professionals almost always assess achievement inequality using statistical methods that make two very strong assumptions on the comparability of test scores.

First, they assume that scores are directly comparable over time, so that a given numerical score corresponds to the same underlying level of achievement across different time periods.

Second, they assume that the test scale has a fixed meaning throughout the range of possible scores. This implies, for example, that a student who improves her score from 100 to 110 has increased her achievement by the same amount as a student who improves from 80 to 90.

Neither of these assumptions is plausible, and if either fails, standard methods may yield very biased estimates of changes in achievement inequality.

The methodology used here is entirely ordinal, which means that it only makes use of the rank-order of students in the test score distribution. The study does not assume that the scale of the test scores is meaningful. Furthermore, it carefully selects data sets for which it is possible to place scores from different eras on a consistent scale, such that a student with a higher score really does have higher achievement, regardless of the year/survey from which the student was drawn.

These two aspects of the method imply that the resulting estimates do not rely on either of the questionable assumptions outlined above.

The research shows that the method used to assess achievement differences matters a lot in an important, applied setting. In addition, the empirical finding that achievement inequality by income actually decreased is itself substantive and interesting.

The methods critiqued are used widely in both public policy and academic research. Future work should investigate whether other ‘standard’ conclusions about achievement inequality are driven by untenable assumptions on achievement test scores.

ENDS

The Income-Achievement Gap and Adult Outcome Inequality’

Dr Eric Nielsen, Economist, Federal Reserve Board, United States

Contact: Division of Research and Statistics, Board of Governors of the Federal Reserve System, Mail Stop 97, 20th and C Street NW, Washington, D.C. 20551. eric.r.nielsen@frb.gov. 1-202-872-7591

Contact immediately before/during/after conference: eric.r.nielsen@frb.gov, 1-202-748-6360 (work mobile), 1-804-301-6695 (alternate mobile)