People with graduate and professional degrees are much richer than everyone else, according to a new study from researchers at the Federal Reserve Bank of St. Louis. But they're not necessarily rich because of what they learned in business school, medical school, or law school.
"It's entirely possible that what's learned in the classroom has much less influence on lifetime earnings and wealth accumulation than most people believe," the researchers write in the study, the latest in a series from the bank's Center for Household Financial Stability that explores the relationship between age, race, education, and wealth.
The researchers looked at the Federal Reserve's Survey of Consumer Finances, which asks thousands of American households detailed questions about their assets and debts every three years. They focused on households headed by someone older than age 40, because most people that age have completed their formal education.
The study found that the more education a head of household has, the more money he or she tends to make. In 2013, advanced degree holders made over $116,000, on average, while high school dropouts earned about $22,000.
But wide as income disparities are, wealth disparities are even more stark. In 2013, households headed by someone with an advanced degree had an average net worth of over $689,000. In contrast, those headed by someone who hadn't finished high school had an average net worth of just $38,000.
And the wealth gap seems to be growing faster. Between 1989 and 2013, the average family headed by someone with a graduate or professional degree enjoyed an impressive 45 percent increase in wealth.
Over the same period, the average family headed by someone with a bachelor's degree or an associate's degree experienced a 3 percent increase in wealth. But the average family headed by someone whose education stopped after high school? A 36 percent decrease in wealth. Households headed by high school dropouts fared worst of all, experiencing a 44 percent decrease in wealth between 1989 and 2013.
So what's going on? The researchers list a few theories about highly-educated individuals: Perhaps they know more about managing their money, or since they select spouses with similar levels of education, maybe they simply create families with lots of combined earning power.
But there's also a strong link between getting an advanced education and coming from a wealthy family in the first place. In 2013, half the families studied who were headed by a graduate or professional degree holder had already received (or were expecting to receive) a sizable inheritance or gift. For families headed by a high school dropout, the share was 15 percent.