Is Education is the Cure for Poverty?

YES, Education paves way out of poverty. BREAKING THE CYCLE of poverty isn't easy, but it's possible. We can all agree it's a problem -- for those who experience it and for those who try to help others climb out or simply survive it.

But it doesn't have to be permanent.

We've all heard it, and many of us have said it to our children, our friends, our neighbors: Get an education. You'll make more money. You'll experience a better quality of life.

Fact is those with higher education levels do earn more money and often avoid the difficulties associated with poverty.

Difficulties include inadequate nutrition, clothing, medical care, even shelter.

And the innocent recipients, children who live in low-income homes, suffer when their parents can't afford those basic necessities.

Low income is defined as twice the federal poverty level, or $38,700 for a family of four in 2005, according to the National Center for Children in Poverty. Nationally, 38 percent of children live in low-income families.

Education does make a difference.

Economists may disagree a lot on policy, but we all agree on the "education premium" -- the earnings boost associated with more education. But what role can education play in a realistic antipoverty policy agenda? And what are the limits of that role?

First, it depends on whether you're talking about children or adults, and schooling versus job training. And second, the extent to which education is rewarded depends on what else is going on in the economy.

As Greg J. Duncan's companion piece (page A20) suggests, investment in early childhood has immense benefits. And at the other end of the schooling spectrum, college graduates' wage advantage over those with only a high-school diploma went up dramatically in the 1980s and early '90s. But the premium that high-school graduates enjoy over dropouts has been flat for decades. In 1973, high-school grads earned about 15.7 percent more per hour than dropouts, 15.9 percent in 1989, 16.1 percent in 2000, and 15.5 percent last year. And for adult workers, the historical record for job-training programs is pretty dismal, though more recent initiatives -- with their focus on more carefully targeting training for local labor markets -- show much more promise.

Nobody doubts that a better-educated workforce is more likely to enjoy higher earnings. But education by itself is a necessary insufficient antipoverty tool. Yes, poor people absolutely need more education and skill training, but they also need an economic context wherein they can realize the economic returns from their improved human capital. Over the past few decades, the set of institutions and norms that historically maintained the link between skills and incomes have been diminished, particularly for non-college-educated workers. Restoring their strength and status is essential if we want the poor to reap the benefits they deserve from educational advancement.

What Research Shows
Julie Strawn of the Center for Law and Social Policy, reviewing an extensive sample of basic education and training programs, concluded that education alone is much less successful in raising employment and earnings prospects than education combined with a strategy of focused job training (with an eye on local demand), "soft skills," and holding out for quality jobs.

One study found that a year of schooling raised the earnings of welfare recipients by 7 percent, the conventional labor economics finding. But given that many of these workers entered the job market in the $6- to $8-an-hour range back in the 1990s, you're talking about moving families closer to the poverty line, not pushing them significantly above it.

Strawn reports that when education is combined with multidimensional job training, readiness, and a quality job search, the returns more than double. One Portland, Oregon, program resulted in a 25 percent increase in earnings, a 21 percent increase in employment, and a 22 percent reduction of time spent on welfare (all compared with a control group that didn't get the services).

This finding makes intuitive sense: Programs that combine general education with training specific to both the individual and his or her local labor market work better than ones that fail to combine these activities. (They're also more expensive, but you get what you pay for.) Yet to get to the nub of the strengths and limits of education and poverty reduction, we need to go back to first principles and think about how they interact with the realities of the political economy.

Education is only a partial cure for poverty because of all the other recent changes in the labor market. At least half of the inequality increase has taken place within groups of comparably educated people, and since 2000 that proportion has been increasing. Income-inequality data show that the concentration of income in 2005 is the highest it has been since 1929. Yet research that Lawrence Mishel and I conducted shows that since the late 1990s, the college wage premium has been flat. In real terms, college wages were up less than 2 percent from 2000 to 2006. Even among the highly educated, only some are getting ahead, and lots aren't.

In short, we are not living in a meritocracy, where we can reliably count on people being fairly rewarded for their improved skills. So we need additional mechanisms in place to nudge the invisible hand toward outcomes that are more meritocratic and just.