Higher education for American Indian and Alaskan Natives increases employment rate but does not close earnings gap

Photo by Rebecca Slater '10 / By Rebecca Studios
Image courtesy of Federal Reserve Bank of Minneapolis

St. Kate's economics faculty Kristine West (above) was part of the University research team published in collaboration with the Federal Reserve's Center for Indian Country Development (CICD).

A postsecondary degree for the American Indian and Alaskan Native (AIAN) populations increases employment rates and labor force participation but reaps smaller gains in earnings compared to their white counterparts. According to a working paper published by St. Catherine University economics researchers and the Federal Reserve's Center for Indian Country Development (CICD), increases in employment associated with a bachelor’s degree or higher are 5 percentage points more among AIAN than whites, however the earnings premium with that degree is 8 percent less for the AIAN community.

In addition, while AIAN complete associate degrees at similar rates to white Americans and are even more likely to have some college experience, they are far less likely to have a bachelor’s degree or higher.

The study examines American Community Survey data from 2008-2016 and drills down into how postsecondary education impacts employment and earnings by race, age, gender and geography. Sample data includes 209,955 respondents who identify as AIAN, and 10,889,055 non-AIAN workers aged 25-55 years. AIAN respondents are further broken down into racial/ethnic subgroups including those who identify as AIAN only (100,440), AIAN-Hispanic (33,967), and AIAN and at least one other race (75,548).

“There is a substantial amount of research out there that examines returns to education and racial disparities in the labor market, but because the AIAN population is often lumped in the ‘other’ category, less is known about how returns to higher education might be different for them specifically,” said Kristine West, PhD, Associate Professor of Economics at St. Catherine University. “This study offers unprecedented detail allowing us a more nuanced look at the AIAN education and workforce experience, and further reinforces that increased postsecondary education alone will not necessarily eliminate earnings disparities among this group.”

There are sizable labor market disparities. With similar education and experience, AIAN earn, on average, 15 percent less and have 6.2 percentage points lower employment rates than white Americans. Interestingly, AIAN who identify as multi-race have a smaller earnings gap at 11.5 percent. To illustrate the findings about differential returns to higher education, study authors used the data to develop a hypothetical case study where postsecondary
education and completion rates for AIAN were increased to match that of white Americans and found that the white-AIAN labor market disparities would still be largely unresolved.

The differential returns to higher education was more pronounced in urban areas than rural, which validates previous research that finds returns on education are more similar for rural workers than urban workers.[i]

[i] Kimmel, J. 1997. Rural Wages and Returns to Education:
Differences between Whites, Blacks and American Indians. Economics of Education Review, 16