Investment in human capital (IHC) has been used to explain and understand income inequality and economic growth. IHC can improve health, raise earnings, and result to overall increase in welfare. Education and training are the most important investments in human capital which tends to respond rationally to cost-benefit analysis. The return on investment is realistically a decent measure as it takes into consideration the cost (direct & indirect) and the expected cashflow discounted overtime over an individual’s labor market participation.
Recent research conducted and published by Economics faculty members Juliet Elu, Gregory Price, and students considered the labor market consequences of attending a Historically Black College/University (HBCU). With 2015 U.S. Department of Education College Scorecard Data, a nonparametric matching estimator was utilized to identify and estimate thetreatment effect of HBCU attendance on median earnings, earnings relative to a high school graduate, and income relative to that of the household at the time of initial enrollment. Usually 6 and 10 years after attendance. The treatment effect parameter estimates suggest that once we account for the differential return to college majors, the urban wage premium, and the proportionality/dependence of the labor market return of Black student college attendees on the share of a college/university’s student population that is Black, there is a long-runearnings premium associated with HBCU attendance. In addition, for HBCUs in general, we find that there is a population of students who would realize a positive labor market premium—as high as approximately 42%—and earn more than a high school graduate if they were toattend an HBCU. With respect to intergenerational income mobility, we found that HBCUattendance enables their actual and potential attendees to move to a higher quantile of incomerelative to their households in the long run.
Our inquiry contributes to an understanding of the labor market and intergenerational mobility consequences of HBCU attendance and their efficacy as active labor market interventions. In general, our findings suggest that HBCUs merit attention for additionalprivate and public resources that would enable them to be more successful as active labormarket interventions. Such a finding is consistent with previous findings by one of our faculty coauthors suggesting that HBCUs, as labor market interventions, continue to have a compelling educational justification.
For full article: see "The Earnings and Income Mobility Consequences of Attending a Historically Black College/University: Matching Estimates From 2015 U.S. Department of Education College Scorecard Data," The Review of Black Political Economy 2019. Vol. 46(3): 171-192.
Juliet Elu is the Charles E. Merrill Professor of Economics and Chair of the Division of Business and Economics at Morehouse College.