The gap between high and low incomes in California is wide and growing, and Californians are concerned. Educational attainment is a key factor in this widening gap. In California, the typical income for families that include college degree holders is more than twice that of a family without any college graduates. Recent declines in college enrollment may make it harder for the state to address its economic divide.

At the start of the pandemic, enrollment in higher education in California fell 12% overall. Enrollment at private not-for-profit institutions declined by 5% from 2019 to 2021, while private for-profits saw a 5% increase. For California’s public system, which comprises the University of California (UC), the California State University (CSU), and the California Community Colleges (CCC), trends have been mixed. Between 2019 and 2022, enrollment in UC, the state’s most selective public university, increased by 2%, while CSU experienced a 6% decline. CCC enrollment dropped by 17%—accelerating a trend driven by stalled population growth, K–12 enrollment declines, and a strong labor market, among other factors.

These declines are especially troubling because of the strong link between college degrees and economic opportunity. While there are racial/ethnic disparities in the “college wage premium,” graduates earn more, are more likely to hold jobs with benefits, and less likely to be unemployed than Californians without four-year degrees.

In 2021, California families at the 90^th percentile of the income scale pulled in 11 times more than those at the 10^th percentile; this gap was 63% wider than it was in 1980—and up 14% since the start of the pandemic. Long-term income inequality has been accompanied by substantial increases in the labor market value of a college degree. Between 1980 and 2021, the median income for families in which any member holds a four-year degree increased by 34%. Families without college graduates did see a 22% increase in median income from 2012 to 2019, but this only brought their median income back up to its 1980 level following losses during several recessions.

If recent enrollment patterns persist, there will be fewer new college graduates in the coming years. Fewer Californians entering the labor market with four-year degrees could exacerbate overall income inequality and widen gaps in income across racial and ethnic groups. The state could address enrollment declines and continue to narrow longstanding racial/ethnic gaps with policies that expand higher education access and support college completion—particularly at its public institutions, which enroll eight out of ten undergraduates in the state. For example:

• Improvements in high school preparation (e.g., A–G completion) and outreach programs can provide students with the information and support they need to reach their educational goals.
• Addressing college affordability could improve college access and success, especially for low-income and underrepresented students.
• Dual admission programs can be structured to support and streamline the transfer from CCC to four-year universities.
• Addressing the needs of adult learners, especially those who have attended college but never gotten a degree (3 million Californians ages 25–64), could quickly boost the number of bachelor’s degrees awarded.

California is facing a tough budget year, and tradeoffs in worthy investments may be necessary. A recent PPIC Statewide Survey indicates that most Californians support the state government taking a role in reducing inequality, and investments that make higher education more attainable have payoffs in multiple arenas.