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The Wealth Gap Is Crushing America's Youth [CHARTS]

student tired maths homework studying study

Mention the ever-widening wealth gap in America and chances are most of the focus will be on the grown-ups. 

Their 401(k)s were pummelled during the recession, their earnings plummeted, and even a college degree couldn’t guarantee them a job in shaky economic times. 

But what about the children?

Under the radar, study after study has shown just how the growing wealth gap could stymie upward mobility for America’s youth. In a telling report  by Washington, D.C.-based think tank, The Hamilton Project, a team of researchers uncover economic data that show exactly how income inequality can impact social mobility in America. 

“It is too early to say for certain whether the rise in income inequality over the past few decades has caused a fall in social mobility of the poor and those in the middle class,” the authors write. “The first generation of Americans to grow up under this inequality is, on average, in high school—but the early signs are troubling.” 

Family incomes have declined for a third of American children over the past few decades.

The reality is that it's even tougher for poor children to make up for their parents' lost ground. A child born to parents with income in the lowest quintile is more than 10 times likelier to end up in the lowest quintile than the highest as an adult (43% vs. 4%).

Wealthy or poor, kids have pretty similar cognitive abilities under the age of 1. But by the time they hit kindergarten, children from the highest earning households score twice as well as poor kids on literacy and maths tests.

In addition to being more likely to have two incomes and parents with college degrees, wealthy families also have more money to throw at their kids' needs. They spend seven times more on educational enhancement tools for their children than low-income families ($9,000 per child per year vs. $1,300).

'By age three, children of parents who are professionals have vocabularies that are 50% larger than those of children from working-class families, and 100% larger than those of children whose families receive welfare,' the authors note.'

In fact, college graduation rates have soared over the last few decades. But if you really look at the numbers, you'll find that most of the growth has been enjoyed by high-income students.

A college degree remains a low-income student's best hope of making it out of poverty and at least into the middle class.

Indeed, a college degree yields higher returns on investment than just about any stock on the market.

Although financial aid counteracts much of the rise in college tuition, many low-income students are intimidated by the soaring sticker price.

Student loans can easily ruin a student from a low-income family. Since 2007, student loan debt has eaten up a 10% larger share of household income for students in the lowest quintile.

How do we bridge the gap? If the surest path to the middle class is a college degree, then the focus should be on helping more students get there. Depending on major, for every $1,000 of financial aid made available to low-income students, colleges have seen a 3 to 6% bump in enrollment. And simply helping low-income students fill out their financial aid applications increased college enrollment by 8%, costing less than $100 per student, the researchers note.


The bottom line: Knowledge is money. Here are some helpful resources for estimating the true cost of college:

CFPB: Paying for College & College Cost Comparison

FAFSA: Federal Student Aid

If you think young people have it bad...

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