Economic Inequality Shapes Education Decisions
A mixed-method research
presented at international marketing conferences
Behind these skyrocketing numbers, a multitude of young people and their families are making “complex, vexing and consequential” education decisions
— Grewal, Meyer, & Mittal (2023)
Global Map of Education Spending
Research Question
In addition to micro and meso-level factors (e.g., individual’s habitus, school and community environment), how a fundamental socioeconomic factor— economic inequality within one’s society affects individuals’ education decisions from the lens of perceived education premium?
Propositions
College Decision:
Economic Inequality encourages individuals to attend college as it amplifies the perceived education premium of college—a wider income gap between college graduates and high school graduates.
Choice of Major:
Economic Inequality motivates individuals to choose majors that promise higher earning potential, even if these fields do not align closely with their personal interests. This shift towards prioritizing external rewards over internal drives is driven by their perception of a more significant education premium between majors—the greater income disparity between higher-paying and lower-paying majors.
Studies
1. Observational cross-sectional data
Data: state-level Google Trend data on regional search interest for college-related terms over a 5-year period (2015 - 2019, 50 US states + DC)
Analysis: Pearson correlation & OLS regression
Key Insights:
With each 0.05 increase in the state-level Gini index, there is an average rise of approximately 17.82 points in the collective search interest for college education within that state, measured on a scale from 0 to 100.
1-3: college decision & 4-5: choice of major
2. Observational panel data
Data: cross-year county-level education data (college & graduate school enrollment) on multiple age groups (target 18 - 24) collected from American Community Survey (2010-2019, 831 counties for one-year estimates, 3,141 counties for five-year estimates)
Analysis: fixed-effect generalized linear model (GLM) with a logit link and the binomial family to account for the bounded nature of proportion (DV) & sensitivity analysis
Key Insights:
As the county-level Gini index increases, a greater proportion of young people aged between 18 and 24 years enroll in the college or graduate school within that county.
Sensitivity analysis suggests that the observed association is robust to unobserved confounders.
3. Experiment: a decision game
Sample: individuals recruited from Amazon Mechanical Turk
Design: one-way between-subject experiment with manipulated economic inequality
Analysis: t-test, Chi-square test, & mediation analysis
Key Insights:
A significantly greater proportion (+20.5%) of individuals choose to attend college when societal economic inequality is high (vs. low).
A mediation analysis supports the mechanism based on perceived education premium of college.
4. Experiment: a tradeoff test
Sample: individuals recruited from Cloud Research
Design: 2 (economic inequality) by 3 (tradeoff pairs) between-within-subject experiment with manipulated economic inequality and randomized tradeoff pairs of majors
Analysis: t-test, mixed ANOVA
Key Insights:
On average, individuals are 21.4% more willing to choose a major with higher external rewards (e.g., earning potential) despite having a lower internal drive (e.g., personal interests) when societal economic inequality is high (vs. low).
5. Experiment: the mechanism
Sample: individuals recruited from Cloud Research
Design: one-way between-subject experiment with manipulated economic inequality (tradeoff pair: moderate vs. highest)
Analysis: one-way ANOVA & mediation analysis
Key Insights:
Individuals show 20.4% greater willingness to choose a major with higher earning potential but less personal interest over a major that aligns more closely with personal interest but offers lower pay when societal economic inequality is high (vs. low).
A mediation analysis supports the mechanism based on perceived education premium between majors.
Tradeoff Pairs of Majors
Conclusion
Rising economic inequality motivates individuals to attend college.
It also drive individuals to prioritize external rewards over internal drives, gravitating to majors with higher earning potential but lower personal interests over those that align more with their genuine interests but offer less pay.
These findings provide policy implications for several pressing challenges in higher education.
Policy Implications
The escalation of students’ debts
Economic inequality may be a contributing factor:
Economic inequality may motivate young people to purse college without adequately considering their financial situation.
It simultaneously increases the perceived education premium of college, potentially leading young people to be overly optimistic about their capacity to repay debts.
WHAT TO DO?
Nudge young people to consider various factors, such as career paths, and financial capabilities, rather than being overwhelmed by the exaggerated perceived education premium of college.
The Humanity Crisis
A multi-facet CRISIS:
Decline in the degrees conferred: the percentage of humanities degrees conferred in the late 2010s was less than 1/3 of in the late 1960s to early 1970s.
Widespread remorse: nearly 50% of humanities graduates express regret over their college major choice (vs. 25% of engineering graduates).
A profound underlying issue: young people often forsake their genuine passions in favor of studying fields promising higher earnings, which can be myopic and detrimental for both academic performance and career satisfaction.
WHAT TO DO?
Boost the perceived education premium of humanities majors by emphasizing the value of transferable skills acquired through studying humanities.
Foster a diverse and inclusive education environment where individuals can unleash their authentic talents and passions and harness their strengths to their fullest potential.