Why Did Women Become More Educated?

During the 1960s, Nobel laureate Gary Becker (1930-2014) told us that the family was like a factory. Through a division of labor, with the husband paying for the kids and the wife caring for them, they nurtured future adults.

One result in 1960 was that men and women from the same birth cohort had similar college graduation rates.

Not any more.

College Graduation Rates

Whether we graduate from college can depend on our parents, marriage markets, and labor markets. According to a recent paper, parental background accounted for one-quarter of the growth in women’s college graduation rates. The key variable was whether the mom went to college. Then it was more likely that her daughters would also. Consequently, we wind up with a repeating pattern with more educated daughters creating more educated daughters.

Below, each red line, representing women’s graduation rates, is above the men:

After parents, the next key college graduation variable was marriage markets and women’s ability to postpone nuptials. They point out that increasingly, women have been getting married at an older age. Meanwhile, their last determinant, job markets, they said was less influential. Using economic jargon, they classify the determinants as exogenous–external–and endogenous–internal. Their exogenous influences primarily focused on family background, labor markets, and marriage restraints. Then, as an internal response, they cited education, labor supply, marriage, and fertility.

Depending on gender and race, the statistics differed. However, the trends favoring women were the common thread.

Our Bottom Line: Human Capital

At this point we can ask why we care about college graduation rates.

More college adds to our human capital. Defined as the knowledge with which we equip ourselves, human capital is intangible while we can see the machinery and tools and buildings that compose physical capital. As a result, more visible, we can see the new machinery that boosts productivity. However, for human capital, as the knowledge of a scholar or a plumber, more knowledge is less obvious.

But, according to the New York Fed, the return remains significant. Compared to a long-term stock market return of approximately 8 percent, the college return hovers close to 12.4 percent:

If building human capital is our goal, then we need to know how.

And say thank you to mom.

My sources and more: Thanks to Marginal Revolution for alerting me to this paper. From there, looking back, we can recall Gary Becker’s groundbreaking perspective. And finally, Liberty Street Economics had lots to add about the return from a college education (that we will further consider tomorrow).